Do You Need Workers’ Compensation for Small Businesses?

Most states, especially here in New York, require business owners like you to have workers’ compensation insurance. And it’s not just for full-time workers. It includes part-time workers, volunteers, and family members who work for your business.

If you’re trying to get a business permit, you’ll need proof that you have workers’ compensation insurance. 

So, how do you get workers’ comp in New York State? You have two options.

What if you don’t have workers’ compensation insurance and an employee gets injured while on the job?

They can sue you for their medical expenses. Then you’ll have to pay those fees out of your own pocket.

You’ll also have to pay New York’s notoriously expensive legal fees to defend yourself in the lawsuit. 

Plus, and most important, New York State will impose a penalty worth triple damages on you, personally.

Do I Still Need Workers’ Compensation Insurance If I Don’t Have Any Employees?

If you’re running your business here in Brooklyn — or anywhere in New York — you might be able to forgo workers’ comp. If –  and that’s a big if – you meet these exceptions:

  • You are self-employed
  • Your business is a sole proprietorship, partnership, LLC, or LLP, and you don’t have any employees

That said, it’s still a great idea to have workers’ compensation insurance to cover yourself. That way it can cover your medical costs if you get injured while on the job. 

And if you don’t have personal health insurance or worker’s compensation insurance? When you get injured, you’ll have to pay those exorbitant medical bills out of pocket. Depending on the severity of your injury, those bills can quickly get up into the five or six-figure range.

Worse yet, you’re stuck without an income while you heal.

What If I Don’t Buy Workers’ Compensation Insurance?

Don’t make the mistake of thinking you can save money by not buying workers’ compensation insurance. The same goes for not buying enough insurance to cover all your employees.

First, the whole point of buying workers’ comp is not just to protect employees. It’s also designed to protect you and your business. If you don’t want to foot the bill if you or one of your workers gets sick or injured, you need workers’ compensation.

Second — and it warrants repeating — companies here in New York are required by law to have workers’ comp to cover every employee. Failing to maintain proper coverage could lead to costly civil and even criminal penalties.

Not Buying Workers’ Compensation Insurance 

Letting your workers’ compensation insurance policy lapse is bad enough. But if you never buy the right insurance within the first year of starting your business or hiring employees, that’s a misdemeanor. 

The fine starts at $2,000 for every 10 days you go without insurance. And they pile up. Fast. That means, by the time you receive your notice, you probably owe at least $4,000 — or more — if you have, at most, five employees.

If you have more than five employees, it becomes a Class E felony and the fine goes up to $5,000-$50,0000.

If you still don’t buy workers’ compensation insurance in the next five years, you could receive another fine between $10,000 and $50,000. And that comes with the potential to receive more fines and penalties — even jail time.

And with the threat of a stop work order to demand compliance, it’s easy to see why it’s much cheaper to just buy workers’ compensation insurance.

Lying About the Number of Your Employees, Their Classification, Wages, or Accidents 

You need to have enough workers’ compensation insurance to cover all your employees. Lying about their wages, their classification (full-time, part-time, or contract), or the responsibilities they perform so you can pay less in insurance premiums will backfire.

Every 10-day period of maintaining false records could result in a fine of $2,000 or double the cost of compensation. You could also face criminal convictions for failing to maintain accurate records. That could lead to a fine of $1,000-$50,000.

Not Maintaining Accurate Payroll

Payroll can influence the cost of your workers’ compensation insurance. That’s why some people try to cheat the system by lying about the amount of their payroll. You might save a buck at first, but you’ll pay criminal and civil penalties in the long run.

The first conviction for failing to maintain accurate payroll is considered a misdemeanor. That means the penalty is a fine of $5,000-$10,000. The second conviction is considered a felony and the fine rises to $10,000-$25,000.

The civil penalty for failing to maintain accurate payroll is $1,000 for each 10-day period. Alternatively, you could end up paying double the amount of compensation for your payroll for the entire time period during which you were found guilty of maintaining inaccurate payroll records.

Workers’ Compensation and Death Benefits

No amount of money can make up for the loss of a spouse or parent. But if they relied on that person’s job to help support the family, the loss of that income can be like rubbing salt in the wound.

New York law requires employers to maintain workers’ compensation insurance that includes death benefits. This is designed to help support the employee’s spouse and children.

If the Employee Was Married but Had No Children

The spouse is entitled to two-thirds of the employee’s average weekly pay for the rest of their life, or until they remarry. If they remarry, they are entitled to a lump sum equal to two years’ worth of benefits.

If the Employee Was Married With Children

The spouse gets one-third of the employee’s average weekly wages. The children split the remaining third between them until they reach the age of 18. If they are full-time students, the children are entitled to continue receiving death benefits until they turn 23.

Death benefits also include help paying funeral expenses up to a certain amount. The limit varies depending on which county the employee worked in.

How Much Does Workers’ Compensation Insurance Cost?

The amount of coverage you need will vary depending on a variety of factors, including:

  • The amount of your payroll
  • Your location
  • The number of employees you hire
  • Your industry
  • Your risk factors
  • Your coverage limits
  • Your claims history, etc.

Ideally, you want to get all the coverage you need, without paying for anything you don’t need. For that, you’ll need to talk to a trusted advisor who knows the ins and outs of New York workers’ compensation insurance like the back of their hand.

At Lincoln Brokerage, we have extensive experience helping Brooklyn business owners get the right coverage for their specific situations. We’ve been protecting New York businesses since 1932. We understand the unique challenges and the risks you face.

Connect with us and get the protection your business needs and your employees deserve.

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