Failure to Carry WC Could Become a Felony

There is a bill before the State Senate that could result in failure to carry Workers Comp insurance becoming a felony. Below is the complete text of an article posted April 11th by the Shira Schoenberg of the State House News Service:

Business owners who fail to purchase workers compensation insurance
will be committing a felony, under a bill the state Senate will consider
Thursday.

Currently, business owners who do not purchase workers
compensation are committing a misdemeanor. Supporters of the bill
(S915) say the enhanced penalties will further deter companies from
not buying coverage. If an injured worker is not covered, his care is paid
for by a state trust fund, which is funded by the employers who do buy
coverage.

“Their failure to have that insurance in place means that if workers
working for them get injured, the rest of the employer community pays
the bill,” said John Regan, chairman of the Workers Compensation
Advisory Council and executive vice president for government aff airs
at the Associated Industries of Massachusetts. The council, made up of
representatives of employers and labor, endorsed the bill.

Regan said the felony characterization “reflects the seriousness of the
issue, and conveys how important it is that coverage be in place.”
But some businesses oppose the stiffer penalties as unnecessary.
Bill Vernon, Massachusetts state director for the National Federation of
Independent Business, said lawmakers need to be more attentive to job
creators, and this policy “would go in the exact wrong direction.”

“Is this really necessary?” Vernon said. “Here we go demonizing the job
creators. Clearly, people who are knowingly misclassifying employees to
escape paying workers compensation should be penalized, but I don’t
think that should rise to the level of a felony.”

Vernon said Massachusetts already has a strict employee
classification system, which makes it difficult for someone to be
classified as an independent contractor. Once a worker is defined as an
employee, his employer must provide some form of workers
compensation insurance. Vernon said he believes the current penalties
are enough to dissuade most people from intentionally misclassifying
employees, and the law could hurt people who misclassify employees
by mistake.

“Making this a felony is really dangerous,” he said. Currently, business owners who do not buy
insurance are subject to a penalty of up to a year in
prison or a fi ne of up to $1,500. A felony would carry
a penalty of state prison for up to fi ve years or jail
for up to 2.5 years, or a fine of up to $10,000.

The bill’s sponsor, Sen. Katherine Clark (DMelrose),
said it is already a felony to commit
workers compensation fraud, so the change would
create the same penalty for not having workers
compensation.

“We hope to really increase the safety of the
employment site for workers, by bringing the issue
of workers compensation to the forefront,” Clark
said.

Stephen Joyce, government relations director for
the New England Carpenters Labor management
program, who has lobbied for the bill, said he has
seen cases where employers in the construction
industry pay employees in cash off the books or
simply fail to buy workers compensation insurance.

“Folks that are doing the right thing and
employing people as they should be and paying to
have their workers covered by workers comp
insurance are at a competitive disadvantage,” said
Joyce. “It negatively impacts our members that work
for legitimate contractors.”

The Department of Industrial Accidents has
reported over 1,000 cases during the past five years
of workers hurt at a business where the employer
has no workers‘ compensation insurance. These
cases resulted in nearly $26 million being paid out
of the workers‘ compensation trust fund.

According to the Department of Industrial
Accidents, enforcement against companies without
workers compensation peaked in fiscal
years 2009-2010. In each of those years, the
department issued stop work orders against more
than 3,480 companies, ordering them to stop
working until they provided their employees with
workers comp insurance. The number dropped to
just under 3,000 in 2011. The department collected
between $1.3 million and $1.8 million a year in fines
as a result of those orders in each of the last three
years.

Grant Woodman, spokesman for Attorney General
Martha Coakley, who sponsored the bill, said as a
result of the delinquent companies, law-abiding
businesses are paying to insure their own
employees and the employees of their competitors.

“This reality is unfair,” Woodman said. “Our
legislation would help curtail this illegal conduct
and create a level playing field amongst businesses
by enhancing the penalties for not carrying workers‘
compensation insurance to more closely align them
with the penalties for those who commit fraud in
this area.“

Sen. James Eldridge (D-Acton), a co-sponsor, said
the bill “sends a strong message to employers that
they need to work to make sure there’s workers
compensation for their employees.”