In New York State, employers are required by law to carry workers’ compensation insurance for all employees. This requirement applies whether the business is seasonal, part-time, or full-time. Failing to carry proper coverage—even inadvertently—can lead to significant penalties and legal consequences. However, if a lapse occurs due to an honest mistake, there are steps you can take to resolve the situation and minimize the fallout.
Penalties for Not Carrying Workers’ Compensation in New York
The New York State Workers’ Compensation Board (WCB) enforces strict compliance with workers’ compensation laws. If an employer operates without the required insurance, they can face:
1. Financial Penalties
• $2,000 per 10-day period: The Board may impose a penalty of up to $2,000 for every 10-day period the employer is found to be non-compliant.
• These fines are not capped and can accumulate quickly, even if no employees filed a claim during the uncovered period.
• Penalties apply even if the business had no injuries during the lapse. The law assumes that the risk existed regardless of claims activity.
2. Stop Work Orders
• The WCB can issue a stop work order, legally requiring the employer to cease all operations until coverage is obtained and fines are addressed.
3. Criminal Charges
• In extreme cases, operating without insurance may result in misdemeanor or felony charges, particularly if injuries occurred while the business was uninsured.
• Business owners or officers of the corporation can be held personally liable for these violations.
4. Loss of Contracts and Licenses
• Certain business licenses or state contracts can be suspended or revoked due to non-compliance, affecting future operations and reputation.
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Common Reasons for a Lapse in Coverage
While some employers may intentionally try to avoid the cost of coverage, many lapses occur due to honest mistakes, such as:
• Miscommunication with the insurance carrier or broker
• Clerical errors within the business office
• Non-renewal of policies due to incorrect paperwork
• Change of address or contact info leading to missed notices
• Belief that seasonal or part-time work does not require coverage (it usually does)
Even if the lapse was accidental, the employer is still considered non-compliant and subject to penalties.
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How to Fix an Inadvertent Lapse in Workers’ Compensation Coverage
If you discover that your business experienced an unintended lapse in coverage, it’s essential to act quickly and responsibly. Here’s what you should do:
1. Contact the Workers’ Compensation Board Immediately
Reach out to the WCB to notify them of the error as soon as possible. Be honest and transparent. Provide:
• The dates your coverage was active
• The date the lapse occurred
• A statement explaining how the lapse happened
• Documentation showing the business did not employ anyone (if applicable) during part or all of the lapse
Early communication may help reduce penalties and show that you’re acting in good faith.
2. Gather Supporting Documentation
To support your request for penalty mitigation, collect records such as:
• Payroll reports showing no active employees during the uncovered period
• A cancellation notice or correspondence from your insurer
• Copies of new or reinstated policy documents
• Internal emails or memos that demonstrate the lapse was unintentional
The more detail you provide, the more likely the Board will be to consider leniency.
3. Request a Penalty Review or Appeal
The WCB allows businesses to request a review or appeal of penalties. If you believe the fine is unfair due to a short-term, accidental lapse, submit a written request including:
• An explanation of the lapse
• A statement of good-faith efforts to maintain coverage
• A formal request for reduction or elimination of the fine
In some cases, the Board may waive or reduce the penalty—particularly for seasonal businesses that had no employees during the uncovered time.
4. Reinstate or Purchase Coverage Immediately
If you are currently uninsured, take immediate steps to purchase a valid workers’ compensation policy. This demonstrates responsibility and compliance moving forward. Many insurers will backdate coverage, depending on the situation.
5. Consult a Workers’ Compensation Specialist or Attorney
If the penalties are substantial or if you’re unsure how to respond to the Board, it’s wise to consult a professional. A specialist or attorney experienced with NY workers’ comp can help:
• Draft and submit appeals
• Communicate with the WCB on your behalf
• Gather the appropriate records
• Negotiate penalty reductions
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Final Thoughts
In New York State, failure to maintain active workers’ compensation insurance—even for a short period—can result in harsh penalties. However, when the lapse is clearly unintentional and quickly addressed, the state often shows flexibility, especially if there was no employee exposure or injury during the uncovered period.
If you’re a seasonal or part-time employer, or you have unique circumstances, make sure your policy aligns with your actual operating dates. A small error in communication or timing can result in big fines—but acting quickly and cooperatively can go a long way toward resolving the issue.
Stay informed, stay insured, and when in doubt, seek professional help to stay in compliance and protect your business.
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If you want to speak with us, call Gary Wallach at 914-806-5853, click here to email, or visit our website.
Company: BGES Group, 216A Larchmont Acres West, Larchmont, NY 10538
email: bgesgroup@gmail.com
website: http://www.bgesgroup.com