New York state law requires that almost all businesses with workers carry workers’ compensation insurance coverage. Employers typically have to buy a policy, although some businesses have the option of self-insuring if they have been operating for long enough and have sufficient resources to do so.
Carrying workers’ compensation insurance is a major expense, and some businesses may try to avoid those costs. A small retail operation, for example, may not seem like a business where a worker will suffer an expensive injury. However, there could be a robbery or a slip-and-fall that leads to a severe injury and a six-figure claim.
When a company doesn’t have appropriate workers’ compensation coverage, it can face two major costs related to that failure.
State penalties
New York law imposes a financial penalty for failing to carry workers’ compensation insurance. These financial charges serve as a deterrent because they likely cost more than insurance coverage would. Businesses can incur up to $2,000 in fines for every 10 days that they are not in compliance with the law. Those fines can accumulate to a point where they will affect a business’s solvency or operational budget.
Liability-related costs
Without the right insurance or assets set aside to cover costs in accordance with self-insurance rules, your business could end up facing a lawsuit from a worker who gets hurt. Major injuries could lead to hundreds of thousands of dollars in lost wages and medical expenses. Your business could potentially be responsible for covering all of those costs if there isn’t appropriate insurance available.
New York could also pursue criminal charges. Those with five or fewer employees could face a misdemeanor charge, while this with more than five employees will face a class E felony charge. The executive or owner who failed to purchase insurance could face massive expenses and possibly incarceration related to their insurance oversights.
When you understand the financial impact of canceling or failing to obtain workers’ compensation insurance for your business, the benefits of doing so will disappear. Educating yourself about the workers’ compensation rules that apply to you as a New York employer will help you comply with state law and run a profitable business.
