An employer that must carry workers comp and doesn't can be fined $1 per employee per day, at least $20 and at most $100 a day. Neglecting to secure coverage is a Class 1 misdemeanor, and willful failure is a Class H felony. People with authority to fix it can be personally liable too.
The civil penalty
G.S. 97-94 sets a penalty for any employer required to carry workers compensation that refuses or neglects to do so: one dollar for each employee, but not less than $20 and not more than $100, for each day until it's fixed. The Industrial Commission can assess the penalty administratively, with a right to a hearing. The penalty can't reach back to noncompliance more than three years before the Commission first assessed it.
Criminal charges
The statute also makes it a crime. An employer that neglects to secure coverage is guilty of a Class 1 misdemeanor. An employer that willfully fails to secure it is guilty of a Class H felony.
Personal liability
The law reaches past the business. A person with the ability and authority to bring the employer into compliance who willfully fails to do so can face a Class H felony, and negligent failure is a Class 1 misdemeanor. That person can also face a civil penalty of up to 100% of the compensation due to employees injured while the business was out of compliance.
Injured workers come first
The Industrial Commission prioritizes payment of compensation owed to an injured employee over payment of any penalty. In other words, going without coverage doesn't make an injured worker's claim go away. It means the business, and possibly its decision makers, may be paying it.
How businesses fall out of compliance
It's rarely a decision to skip coverage. A business grows from two employees to three and nobody revisits insurance. A policy cancels for nonpayment and the notice gets missed. A corporation forgets that its officers count toward the three. Any of these can leave a business exposed.
Getting compliant
If you've grown past three employees without coverage, fix it now. A policy can usually be placed quickly, and the cost is set mainly by payroll and the type of work. We'll also explain the year-end audit so the final premium doesn't surprise you, and help you collect certificates from any subcontractors.
In short
- The civil penalty is $1 per employee per day, at least $20 and at most $100 a day.
- Neglect is a Class 1 misdemeanor; willful failure is a Class H felony.
- Decision makers can be personally liable, up to 100% of compensation due.
- Injured workers are paid before penalties.
Related questions
- How many employees before I need workers comp in NC?
- Do subcontractors need workers comp in NC?
- How many employees before I need workers comp in South Carolina?
- Does business insurance cover hurricane damage in NC?
Coverage pages
- North Carolina Business Insurance
- Wilmington Business Insurance
- Hampstead Business Insurance
- Southport Business Insurance
Talk to us
Every situation is a little different. If you want someone to look at your own policy, call us at (910) 791-1011 or start a quote online. We're an independent, family-owned company founded in 1977, with eight offices in North Carolina, and we're licensed in North Carolina, South Carolina, Virginia and Maryland.
Sources
- N.C. Gen. Stat. 97-94 (penalties for failing to secure workers compensation)
- NC Industrial Commission, Workers' Compensation Insurance Requirement
This page is general information, not a coverage determination or legal advice. Policies, rules and availability vary and change. Review your own policy or talk to your advisor.