The New York Workers’ Compensation Board collects $3 Million per year in procedural penalties alone. This is a staggering figure – amounting to approximately $300 in penalty for each new case accepted by the WCB. New York is a form-driven state, and most common penalties arise from the late filing of required boilerplate forms.
New York’s Workers’ Compensation Law (“WCL”) is a minefield of penalties, fines, and criminal complications for the unwary. There are different penalty considerations for employers, claimants, insurers, and even attorneys. This article discusses the most common penalties from the perspective of each participant.
1. Employer Penalties.
Employers face penalties for (A) failing to obtain insurance and (B) cheating their insurer by misclassifying or concealing employees.
A. When an Employer Fails to obtain insurance.
An employer failing to provide worker’s compensation insurance coverage for employees is subject to a penalty of $1,000 for every 10 days without coverage. Workers’ Compensation Law § 52(1). The employer is still responsible for paying all medical and wage benefits awarded. WCL § 26
In addition, there are criminal penalties for failure to carry workers’ compensation coverage: For employers with fewer than five employees, the criminal penalties could be conviction of a misdemeanor, and a fine (between $1,000 and $5,000). For employers with more than five employees, the potential criminal penalties could be conviction of a Class E felony, subject to a fine (between $5,000 and $50,000) or prison from one to four years, or both. WCL § 52(1)(b).
In addition, The law prohibits business owners that fail to comply with workers’ compensation from bidding on public work contracts. WCL § 141B. It creates a one year ban on a business owner (or a substantially owned entity of such person) from bidding on a public contract if he or she was (1) fined, (2) served with a stop work order, or (3) convicted of a misdemeanor violation for failing to comply. It prohibits any owner (or a substantially owned entity of such person) from bidding on public contacts for five years if he was convicted of a workers’ compensation (1) felony or (2) a Class A misdemeanor for discriminating against an injured veteran.
The law authorizes the Workers’ Compensation Board to issue stop-work orders and immediately shut down a business that is not complying with workers’ compensation requirements. WCL § 141a. In 2010 (the most recent year for which statistics are available) the Board issued more than 1,600 stop work orders. Such orders can be made for failing to (1) maintain workers’ compensation coverage for employees and (2) pay penalties related to previous failures. These violations are deemed a sufficient danger to public health and safety to justify the stop-work order. The issuance of the “stop work” order does not terminate the employer’s responsibility for placing coverage or paying benefits. WCL § 52(1)(e).
It is an affirmative defense to a criminal prosecution under this provision that the employer took reasonable steps to secure compensation coverage. See WCL § 52.
B. Payroll fraud -misclassification or concealment.
The law provides a penalty where an employer is found to “intentionally and materially misclassifying employees as independent contractors” or misrepresenting employees’ duties. The penalty for misclassification is $1,000 for every 10 days. WCL § 131.
For intentionally and materially understating or concealing payroll, the penalty is $1,000 for every 10 days.WCL § 131. In additional, there is a criminal penalty of “not less than $5,000 nor more than $10,000.” Subsequent violations are class E felonies subject to a fine of “not less than $10,000 nor more than $25,000.”
The Board may collect these penalties from both the real and personal property of the employer – which includes the corporate officers – who are personally liable for any debt to the Board. See WCL § 141-a(6).
2. Claimant Penalties.
As per Section 25-3(d) a claimant’s attorney – not the claimant – is subject to a penalty of $500 for a “frivolous request for an adjournment” of a special part/expedited hearing. In my experience, I have never seen such a penalty applied.
Any person who knowingly and intending to defraud the workers’ compensation system by presenting (or assisting in presenting) an application for benefits, which contains a misrepresentation of a material fact. WCL § 114-a The penalty: Class E Felony charges. In addition to a Class E Felony conviction, the claimant who is convicted loses the right to all past and future compensation benefits. Fraudsters have to return any money they got through their fraud. This is contrary to the general rule of law that claimants do not have to pay back money fraudulently obtained.
3. Carrier Penalties.
- A penalty of $300 for failure of carrier or employer to file a Form C-8/8.6, “Notice That Payment Of Compensation Has Been Stopped or Modified,” within 16 days after compensation has been paid. WCL § 25-1(d)
- For failure of employer or carrier to pay compensation installment within 25 days of it being due, there is a mandatory penalty of 20% of compensation then due and an assessment of $300 – which is payable to claimant. WCL § 25-2(c).
- (In a denied case) The WCL requires a penalty of $300 – payable to claimant – when a carrier fails to file Form C-7, Notice of Controversy within 18 days after disability or within 10 days after knowledge or within 10 days after receipt of notice (Form C-2) by carrier, whichever period is greater. WCL § 25-2(c).
- (In an accepted case) For failure of carrier to begin compensation payments within 18 days after disability or within 10 days after knowledge or within 10 days after receipt of notice (Form C-2) by carrier, whichever period is greater, the penalty is $300 – payable to claimant.WCL § 25-2(c).
- Where the Board finds that the employer or carrier has objected to an award without just cause, a penalty $300 payable to the claimant may be ordered. WCL § 25-2(c).
- Under WCL § 25-3(c) a carrier can be penalized for causing an unnecessary adjournment. The penalty is $25 to Special Funds and
$75 paid directly to the claimant. The law defines what could be considered “behavior causing an unnecessary adjournment.” WCL § 25-3(c) states as follows:
“Dilatory tactics may include but shall not be limited to: failing to subpoena medical witnesses or to secure an order to show cause as directed by the referee, failing to bring proper files, failing to appear, failing to produce witnesses or documents after they have been requested by the referee or examiner or as directed by the hearing notice, unnecessarily protracting the production of evidence, or engaging in a pattern of delay which unduly delays resolution.”
- For refusing (or neglecting) to file Form C-2, “Notice of Injury,” or to keep proper records, a penalty of “not more than $1,000.” See WCL § 100-4. For an employer who refuses to file a C-2, the Board may impose a penalty of up to $2,500.
- A carrier can be penalized $50 for every report or requested filing that is not filed within time. The Board is especially aggressive in applying this penalty, which grants the WCB power to penalize where the carrier:
“… failed to file a notice or report requested or required by the board or chair or otherwise required within the specified time period or within ten days if no time period is specified, the board may impose a penalty in the amount of fifty dollars unless the employer or carrier produces evidence sufficient to excuse its conduct to the satisfaction of the board.”
See Section 25-3(e)
- Section 114-a —for filing an appeal “without reasonable ground – the costs of “such proceedings” may be payable to the Board as a penalty, including attorneys fees.
- NYCRR § 300.2(3) (WCB rules and regulations) provides that if the employer/carrier fails to file an independent medical report or notice same properly (within the time requirement and using forms promulgated by the Board) the IME report will be precluded. See also WCL § 137.
- As per WCL § 25-3(d), a carrier is subject to a penalty of $1,000 for “frivolous adjournment of an expedited case”. This penalty is payable to Chair, for deposit in WCB Special Revenue Account. This penalty may be payable by the carrier or by carrier’s attorney if the attorney is not an employee of carrier.
4. Attorney penalties.
The WCL allows for penalties to be assessed against attorney – not just their clients – who request frivolous adjournments. The law states that the penalty is payable by the attorney – not their client. The penalty for an employer’s attorney who requests a “frivolous” adjournment of an expedited hearing is $1,000, payable to the Board. WCL § 25(3)(d). The penalty for a claimant’s attorney who makes such a frivolous request is $500. Unrepresented claimants are not subject to any penalty.
Here is a handy chart of the most common penalties.