If you own a large or small business and have employees, you need workers’ comp insurance. Workers’ comp protects you and your employees from lost wages and medical expenses resulting from illness or injury incurred on the job.
Even if your state doesn’t require workers’ comp, if one of your workers gets seriously injured while in your employ, you could be sued. While not always required, workers’ comp is a good way to protect your business from legal expenses that could wind up bankrupting your company.
5 States with the Strictest Workers’ Comp Laws
While some states are more lenient (Texas doesn’t require workers’ comp at all), others are stricter. Penalties range from thousands of dollars to, in some instances, jail time.
California
No state has stricter workers’ comp rules — or harsher penalties — than California. Not only can employers pay fines of up to $100,000 for not providing workers’ comp insurance, they can even go to jail. In California, not providing workers’ comp insurance to your employees is a criminal offense punishable by a fine of no less than $10,000, up to a year in jail or both.
New York
In New York, the penalties are severe for not providing workers’ comp insurance.
For instance, Criminal Section 52 of New York’s Workers' Compensation Law states that failure to provide workers’ comp for an employer of five or fewer employees can result in a misdemeanor subject to fines between $1,000 and $5,000. For companies with more than five employees, the penalty is a class E felony with fines between $5,000 and $50,000. Fines also apply to companies that misrepresent themselves for actions like paying workers off the books, not reporting wages of undocumented workers and misclassifying employees as independent contractors.
Illinois
As the Illinois Department of Insurance likes to say, “In Illinois, workers’ compensation insurance is the law.” According to Illinois law, any employer who willfully and knowingly fails to provide workers’ comp insurance to his employees may be fined as much as $500 — every day. Officers and directors of a corporation can be fined as much as $10,000 and be held personally liable.
Penalties are stricter for employers who knowingly fail to provide workers’ comp. Any employer who knowingly does so loses all protections provided by the Workers’ Compensation Act. This means a worker can sue the employer in civil court, where damages are unlimited. While failure to provide workers’ comp is a misdemeanor, doing it willfully is a felony.
New Jersey
If you’re an employer in New Jersey and you fail to provide your employees with workers’ comp insurance, you can be fined $5,000 for each 10-day period you’re in violation. You can even face criminal charges. In New Jersey, the penalty for an employer failing to carry workers’ comp is a $10,000 fine or up to 18 months in jail.
Pennsylvania
In Pennsylvania, an employer’s failure to have workers’ comp insurance is a criminal offense. Willfully and knowingly failing to purchase workers’ comp coverage for your employees is a third-degree felony, resulting in fines of $15,000 or seven years in jail. Every day that an employer is not in compliance is a separate offense. Non-intentional violations are just misdemeanors.
States where jail time is an option include:
- Illinois
- California
- Pennsylvania
- Massachusetts
- Michigan
What is Workers’ Comp?
Workers’ comp, formally known as workers’ compensation insurance, is insurance that provides financial benefits to workers who get sick or are injured on the job. Workers’ comp provides for missed wages, medical expenses, disability and death benefits.
Workers’ comp is insurance paid for and provided by the employer. Unlike health insurance, the employee is not required to contribute financially. Rules and regulations are overseen by each state’s workers’ compensation board. In cases of dispute, the board makes the ultimate determination. Claims are paid if the illness or injury is deemed credible. Claims can be denied if the worker becomes ill or injured from working in an unauthorized manner, is intoxicated or harms themselves.
Who is Covered by Workers’ Comp?
Employees who are not provided workers’ comp by the company they work for can sue the company if they get hurt on the job. Compensation can come in the form of lost wages and medical expenses. All states, except for Texas, require businesses to carry workers’ comp insurance.
If you’re a full-time worker, chances are your employer has workers’ comp insurance. Specific requirements vary from state to state. Some states even have requirements that cover temps, interns, part-time employees and contractors. Some states do not require workers’ comp for:
- Business owners
- Real estate agents
- Farmhands
- Insurance agents
- Part-time workers
What Is Covered by Workers’ Comp?
If a company carries workers’ comp insurance and an employee suffers a work-related illness or injury, workers’ comp will cover their:
Lost wages
If a worker gets injured on the job, whether it’s at the workplace itself or on a job site, they can petition the company for lost wages that result from the event. This is true only if the company has a workers’ comp policy. If not, the worker must sue the company.
Workers’ comp benefits do not apply if employees get sick or injured on their own time. Even if the company does carry workers’ comp insurance, benefits may not be paid out if the worker is intoxicated, performing their duties in an unauthorized manner or hurt themselves intentionally.
Medical expenses
Workers’ comp compensates employees for wages lost while off the job or recuperating from illness and it can help pay the worker’s medical costs. Medical expenses incurred because of work-related illness or injury can include:
- Doctor visits
- Surgeries
- Prescription medications
- Emergency room visits
- Physical therapy
Repetitive care
Simple workplace injuries end when the employee is able to return to work. Sometimes, however, the injury or illness is more severe, requiring repetitive medical care. Because these are ongoing events related to the initial illness or injury itself, they also qualify for workers’ comp. An example of this is if an employee hurts their back on the job. This type of injury can go one for months — sometimes years — requiring extended and additional medical treatment such as physical therapy.
Recurrent injuries and disability
While some work-related injuries are a one-time event (like falling off a roof or getting hit by a vehicle), others occur over a long period of time and take months or years to become evident. Such examples might be carpal tunnel syndrome or a bad back. If an office employee develops these over a long period of time and the employer did nothing to help curb the injury (like providing an ergonomic mouse pad and chair), then the employee may have a case for workers’ compensation.
If an employee’s illness or injury is so severe that it disables them temporarily or permanently, workers’ comp can provide financial support to make up for lost wages and medical expenses. In the case of an injury, this might involve the loss of a limb or an eye. For an illness, the long-term exposure to asbestos could be the culprit (if the employer owns the building). If the employee cannot return to work, workers’ comp can provide financial support for disability.
Note: Workers who become disabled on the job oftentimes can be approved for Social Security Disability Insurance (SSDI). Workers who are injured on the job can receive both workers’ comp and SSDI at the same time. One does not exclude the other.
Funeral expenses
In a worst-case scenario, if the worker dies from illness or injuries sustained while on the job, workers’ comp will pay for all or some of the funeral expenses, depending on state regulations. Most states have a maximum amount, anywhere from just a few thousand dollars to as high as $10,000 or more.
On top of that, death benefits for the spouse of the deceased or their descendants can be awarded. If the beneficiary is related to the deceased by blood, or they depended on them financially, they often qualify for death benefits. Rules and regulations vary from state to state.
Who is Exempt From Providing Workers’ Comp?
All states but Texas require businesses to provide workers’ comp insurance. Even so, there are exemptions. Certain types of business owners, such as independent contractors, sole proprietors and members of LLCs, can at times be exempt from providing workers’ comp. In short, owners of very small businesses are often exempt.
Even if your business is exempt from carrying workers’ comp, that doesn’t mean there won’t be situations where you’ll need it. Most government contracts require you to carry workers’ comp. Sometimes a client may request to see your coverage. If neither of you have coverage, they may wind up being liable if someone gets hurt on the job. Sole proprietorships who qualify for exemption can also obtain a workers’ comp ghost policy. This might provide a certificate of insurance (COI) without having to pay full price for workers’ comp coverage.
Federal Workers’ Comp Programs
Because federal workers work for the federal government, they are exempt from state rules and regulations. All federal employers are required to carry workers’ compensation insurance; all employees and officers of the federal government are covered under the Federal Employee’s Compensation Act (FECA). FECA provides for lost wages and medical expenses resulting from work-related illness and injury.
Federal workers’ compensation programs are overseen by the Office of Workers Compensation Programs (OWCP), under the direction of the Department of Labor (DOL). FECA was enacted to make sure all federal employees are covered for injuries or illnesses suffered in the workplace.
Large or small, your company needs to have an employee injury response procedure in place. Here’s an example:
- Determine the condition of the injured worker.
- If 911 is not needed, take the injured party to a medical facility.
- If the employee refuses advanced medical care, provide first aid.
- Post incident, report the event to your insurance company.
- Fill out a First Report of Injury form.
- Report all details to your insurance carrier.
- From these details, the insurance carrier will assess the situation.
- The employee will either remain at work or return to work later, depending upon the severity of the injury.
Compare Workers’ Comp Insurance
If you’re looking for a workers’ comp insurance policy, you’ve come to the right place. Benzinga has a wide array of articles and reviews covering everything workers’ comp. These pieces are not only insightful, they give you the best set of options when choosing the insurance carrier that’s right for you. Come check out these great companies that offer workers’ comp insurance.
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Frequently Asked Questions
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It is the responsibility of the employer to carry workers’ comp in case an employee becomes ill or is injured on the job. All states except Texas require employers to carry workers’ comp, although each state has its own exemptions. Even in Texas, if a company wants to bid on government contracts, it must carry workers’ comp. Employees are not required to contribute financially to the policy.
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Workers’ comp rules stipulate all illnesses and injuries incurred on the job are covered, whether they occur at the workplace or on a job site. Everything from lost wages to medical expenses, ongoing care, disability and funeral costs are covered by the policy. It’s important to note that these illnesses and injuries must occur at the workplace, not on the employee’s own time, and that they can be denied if the worker is acting in an unauthorized manner, is intoxicated or becomes injured intentionally.
