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Foregoing workers’ compensation coverage can lead to penalties

If you’ve considered foregoing workers’ compensation insurance for your business, you’ve likely thought of it as a cost-cutting measure. Saving money on a costly policy may seem like a good way to improve your bottom line. But it can cause you to run afoul of the law. Not only do your employees deserve proper coverage, they – and the state of New York – may hold it against you if you don’t purchase a policy. By failing to provide your employees workers’ compensation insurance, you could end up paying more down the road.

Who does the law cover?

By New York law, business owners must provide workers’ compensation insurance for their employees. There are some exceptions to this rule. Yet, these primarily apply to government and trade workers covered by their own programs, as well as businesses with two or fewer employees. Independent contractors generally do not qualify for workers’ compensation insurance, either. But companies often misclassify full-time employees in this manner to avoid paying benefits.

What are the penalties for noncompliance?

If your business does not follow New York’s workers’ compensation laws, it could face a variety of penalties. For your business’ first offense, it will likely receive a fine of $2,000 for every 10 days of noncompliance – which can add up fast. You will also receive the same fine for misclassifying employees as independent contractors. Further or more serious offenses could cause your business to receive misdemeanor charges. If your business employs less than five workers, you will receive a fine between $1,000 and $5,000. If your business employs more than five workers, you will face penalties between $10,000 and $50,000. Your business will also have to pay fines between $10,000 and $50,000 if subsequent offenses occur, in addition to felony charges – or a stop work order from the state.

Providing workers’ compensation coverage may prove costly for your business. But purchasing a proper policy will save you from liability in the long run. If your business is facing fines or charges for noncompliance, an attorney can help you find a way forward.