The cost of not providing coverage
When the Workers’ Compensation Division (WCD) discovers you do not have coverage when you should, it will send you an order. That order will notify you of the period of noncompliance and the cost of your fine. The penalty for the first offense is twice the amount of premium you should have paid for insurance, with a minimum of $1,000.
If you continue to employ workers without coverage, the penalty increases to $250 per day for each additional day of noncompliance after the first order. There is no limit on the total penalty assessed. Also, if a third order or more is issued, WCD will request a permanent court injunction to force you to stay in compliance. If you disobey the injunction, you will be in contempt of court and subject to other types of sanctions, including jail time.
The expenses that result when a worker is injured could cost you even more than penalties. By law, an employer without insurance is financially responsible for the same benefits insured workers receive. The law requires that a certified claims agent process the claim. You have to pay a fee for this processing, in addition to claim benefit costs.
The total bill can (and often does) amount to hundreds of thousands of dollars. By law, bankruptcy may not reduce this debt. Business owners including corporate directors and officers, and limited liability company members and managers, are personally and severally liable. Also, employees can file a lawsuit against their employer if the employer does not have insurance – generating more costs.