NC Industrial Commission Targets Scofflaw Firms With No Worker Injury Coverage

North Carolina Industrial Commission leaders met recently to discuss policy changes geared toward granting the authority more power to penalize scofflaw business that fail to secure legally-mandated workers’ compensation insurance.
This has been a major problem in recent years, as the News & Observer reported back in 2012. The publication found tens of thousands of businesses in the state put workers at grave risk by failing to purchase workers’ compensation insurance that would cushion the financial blow for injured employees. Unfortunately, the NCIC typically fails to act until someone is actually hurt, doesn’t get a paycheck, is stuck with mounting medical bills and finally reports the company. Even then, the newspaper noted, the commission rarely enforces penalties and efforts to reimburse workers for the cost of health care could take years.

All companies with three or more employees are required to buy insurance or formally certify to the state that it can cover the expense of on-the-job worker injuries. However, the commission doesn’t actually ask for this information, and instead contracts with a third party to maintain a database. But until very recently, there had not been a formal effort to track down those companies that aren’t abiding by the law. Instead, the commission acts when a worker is hurt and asks for intervention. By then, the worker is facing down poverty – foreclosure, bankruptcy and wrecked credit.

Our Charlotte work injury attorneys know that while injured employees whose companies lack insurance could sue the business for coverage. Still, it tends to be more effective to go through the commission, which can order the company to pay what workers are due. But unless the commission also enforces penalties, businesses may have little incentive to follow the law in the first place.

The latest meeting in Raleigh was an attempt to address these shortcomings. The commission said in the last year, the agency’s fraud unit – previously focused mostly on workers committing fraud – has been aggressively pursuing companies that fail to secure the appropriate workers’ compensation insurance.

In late summer, the commission submitted a list of possible solutions to more effectively hold companies accountable.

One of the biggest problems deals with companies who improperly classify employees as independent contractors, thereby skirting the requirement to pay workers’ compensation. A recent five-part series by McClatchy, The Charlotte Observer and The News & Observer touched on this issue. In “Contract to Cheat,” reporters found nearly $470 million in tax revenue just within the construction industry in North Carolina is lost as a result of this practice.

Certainly, workers’ compensation premiums are expensive. But the cost to injured workers whose bosses are uninsured can be devastating.

This is why the commission has promised a greater push for action. Among the changes proposed:

  • Legislation that would clearly define which workers are “employees” and which are “independent contractors.”
  • Allow the commission to issue stop-work workers for firms found to be running without the necessary work injury insurance.
  • Grant commission deputies or members the authority to hold people or companies in contempt of court, hold hearings for contempt and issue arrest warrants when companies refuse to comply with insurance or payment requirements.
  • Give commission authority to enforce fines against companies that knowingly misclassify workers for the purpose of avoiding insurance payments.
  • Require firms who buy “ghost policies” to sign a waiver indicating they understand the policy won’t cover workers in the event of an injury, and assuring they know that makes the company responsible for making up the difference.

If you have been injured at work, contact the Lee Law Offices at 800-887-1965.

Additional Resources:
NC Industrial Commission leaders identify laws that could curtail labor fraud, Oct. 24, 2014, By Mandy Locke, The Charlotte O rver

More Blog Entries
Can Injured Workers Recover Damages for Pain and Suffering? Oct. 26, 2014, Charlotte Workers’ Compensation Lawyer Blog

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