Beware of the Consequences of not having Workers’ Compensation and/or Disability Insurance

Beware of the Consequences of not having Workers’ Compensation and/or Disability Insurance

Posted on July 16, 2012 by

Do you have the proper coverage for your employees? If you don't, you can incur steep penalties.Recently one of our clients received a very disturbing bill of $72,000 from the New York State Workers Compensation Board. All because their records indicated that they had neither Workers’ Compensation nor Disability Insurance Coverage. While this situation was favorably corrected, the penalties they assessed caused them some alarm.

If you have employees, two of the many New York State requirements mandate that you must have Worker’s Compensation and Disability insurance, starting from the date you hire your first employee.  Exceptions include:

  1. No employees, other than 1 or 2 officers who own all of the stock of the corporation

  2. Domestic worker in a private household working less than 40 hours per week

  3. Only employees are high school students who work part-time

  4. No longer in business

  5. Seasonal business

  6. Business is temporarily closed

  7. Obtained a new insurance policy through a different insurance company

The current penalty for not having Worker’s Compensation Insurance is $2,000 for each 10 day period of non-compliance.

The current penalty for not having Disability Insurance is .5% of the payroll during the period of non-compliance, plus a one-time penalty of $500.

In addition, if an employee gets injured on the job or an illness occurs while lacking proper coverage, you will also be liable for the cost of the claim.

Be aware that the responsibility for maintaining your Worker’s Compensation or Disability insurance is up to you as the owner and not your accounting firm and/or your payroll company.  If you deal with an insurance broker, they should inform you of a cancellation, but this is not always the case.  If you begin receiving cancellation notices, it is your responsibility to rectify the situation.

If for any reason your Worker’s Compensation or Disability insurance is cancelled, your insurance carrier will inform the State of New York Worker’s Compensation Board of the cancellation. The penalty is calculated from the first day of non-compliance until the first day a new policy is issued. By the time you receive a notice of non-compliance, months can go by while the penalty mounts up.

While there are many legitimate reasons why a policy is cancelled, the Worker’s Compensation Board will not accept a letter of explanation from either your accountant or lawyer, in order to expunge the penalty.  Either an owner or an officer of the business must write a detailed explanation of what occurred on company letterhead.

Diapoules, Feinstein, & Hochberg has been very successful in helping owners write letters of explanation and having the penalties expunged.  If you’ve received a notice of non-compliance, do not hesitate to call us at (631) 547-1040.