Virginia to Raise Penalties for Employers Without Workers’ Comp Coverage

May 13, 2014

Employers in Virginia who fail to provide workers’ compensation insurance for their employees will be assessed, beginning July, a civil penalty of up to $250 per day for each day of noncompliance, subject to a maximum penalty of $50,000, plus collection costs.

Virginia Workers’ Compensation Commission said the state’s General Assembly approved an increase in the civil penalty imposed when an employer required to insure under the Workers’ Compensation Act fails to insure. The current law imposes on employers a civil penalty of at least $500 and up to $5,000 for each period of being uninsured.

The law change amends section 65.2-805 of the state’s Workers’ Compensation Act which addresses the civil penalty for employer failure to insure. The amendment was approved March 7, 2014 and will be effective on July 1, 2014.

“The law had not been updated in many years, and the penalties were not actually in line with the cost of workers’ comp insurance coverage,” said Laura Collins, insurance department manager at the Virginia Workers’ Compensation Commission.

“So sometimes, employers would actually risk not having worker’s comp insurance and face penalties instead of having workers’ comp insurance coverage which is actually mandatory insurance coverage required by law for those employers who are required to have it,” she said.

“So the penalties were so low, some employers were going without coverage even though they were required to have coverage,” Collins said. “The workers’ compensation insurance is require by law, and they don’t want to fine employers, but hopefully with a higher fine, employers who are supposed to have the coverage will obtain the proper coverage rather than risk facing the penalty.”

Virginia Workers’ Compensation Commission said an employer is required by state law to insure in Virginia when they regularly employ more than two part-time (or full-time) employees.

A business that hires subcontractors or other business to assist them in their trade or to fulfill a contract must count the subcontractor’s employees as well as their own employees in determining total employees for coverage requirements, the commission said. For a contractor whose work varies, the commission looks to the “established mode” of performing work. A contractor that hires one or more subcontractors with employees to accomplish their business is required to carry workers’ compensation insurance.

Virginia Workers’ Compensation Commission said the workers’ compensation coverage requirements are complex, but focus on number of employees. The commission said it is important to be aware that an “employee” is defined broadly under the state’s Workers’ Compensation Act and includes every person in the service of another under any contract of hire, written or implied, lawfully or unlawfully employed.

“Employee” includes statutory employees (subcontractor’s employees), corporate officers, minors, undocumented workers, working family members, apprentices, temporary and seasonal employees. A business that doesn’t count all of its employees may not realize it is required to carry coverage, the commission said.

The commission said employers should also be aware that designating a worker as an “independent contractor” does not necessarily mean they are not an employee. Workers’ compensation looks to whether the business exerts control over the manner and means of how the work is performed. In the event of a claim, the facts of the work circumstances will determine if the individual is covered for workers’ compensation, regardless of payment on a 1099 designation, the commission said.

Source: Virginia Workers’ Compensation Commission

Topics Workers' Compensation Commercial Lines Business Insurance Virginia

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