Click To Call Free Consultation 919.741.4825
Call for Free Initial Consultation 919.741.4825
text
Dysart Willis

Punitive Enforcement - NC Industrial Commission Adopts Policy Change Against Noninsured Employers

North Carolina businesses with three or more employees are required to have workers compensation insurance coverage under NCGS 97-93. Failure to secure the required policy can result in civil fines and criminal penalties against noninsured employers under the companion statute, NCGS 97-94. The policy behind the law is understandable - in the event of a workplace injury, insurance should be in place in order to cover any medical bills, lost wages, and permanent disability suffered by a worker injured on the job.

While the law itself is not new, the Industrial Commission only began systemic enforcement of the noninsured penalties in roughly 2012 when an online tool made identification of noncompliant companies easy to identify. To date, thousands of employers across North Carolina have received penalty assessments alleging noncompliance and imposing a hefty fine. To most business owners these penalties came as a shock. Often, they were unaware of the requirement that their business carry workers compensation insurance. Other times, employers believed that workers comp was in place only to learn that the policy had been mistakenly cancelled or not renewed by either themselves, their payroll vendor, or the insurance company. Most troublesome have been the penalty amounts. Because NCGS 97-94(b) allows for a $50 penalty for each day a company fails to carry the required insurance, it is not unusual for a business to face fines any where between several thousand and $100,000.

With the imposition of civil penalties, criminal prosecution, and enforcement proceedings, Dysart Willis had devoted itself to the representation of employers facing noninsured penalties. Until recently, so long as the employer had secured workers compensation coverage and could demonstrate that no claims had been filed during the period of non-compliance, resolution of these matters was relatively straightforward. The Industrial Commission, through the Attorney General's office, was generally willing to settle the cases for a much reduced penalty and negotiate a payment schedule. The result was that noncompliant businesses were made compliant without their business being financially crippled or having to lay off employees, insurance coverage for potential workplace injuries became more widespread, and the Industrial Commission collected otherwise unrealized revenue for the State.

This cooperative policy has unfortunately been scrapped by the Industrial Commission in favor of a more punitive approach. While penalty reductions can still be negotiated upon a business' documentation of inability to pay, the reduced amount can still remain in the tens of thousands of dollars. For a small business this amount can unfortunately impact the future of the company and can force a business owner to weigh whether he or she is able to continue to pay his workers and/or keep the company open. From a legal perspective, these cases are also difficult to defend because the language of the statute applies so broadly and potential defenses to the penalties are often narrow.

It is difficult to understand the position of the Industrial Commission in these types of situations. The purpose of punishing business that knowingly flaunt the law or have an employee that has been injured without workers' comp insurance in place is easy to appreciate since the Industrial Commission is tasked with the administration of workers compensation cases and has a policy interest in ensuring fairness towards an injured worker. But where the noncompliant employer has secured the necessary insurance coverage and no employees have been injured, providing an allowance for the small business to resolve the case without significant financial hardship seems to be a more sound policy approach.

With a significant portion of our practice devoted to the defense of noninsured employers, Dysart Willis will continue to monitor the most recent developments involving these types of cases so we can best represent our clients. If you have received a Penalty Assessment Order and would like to speak with an attorney experienced in these matters, don't hesitate to contact our office.