According to the National Council on Compensation Insurance (NCCI), net workers’ comp premiums fell by 3% in 2024 with the combined ratio at 86 (meaning insurers are paying less than they receive). It is worth noting that they also observed a 5% decrease in lost-time claims, whereas the severity (cost per claim) increased by 6%.
Workers’ compensation insurance is meant to protect employees when they get hurt on the job, but it also protects employers by covering costs for sudden injuries or accidents in the workplace. Laws regarding workers’ compensation vary between states. For example, following NC workers comp requirements, employers with three or more employees are required to carry workers’ compensation insurance.
Failing to provide coverage can lead to serious legal consequences.
Let’s find out the possible penalties for employers who violate this rule.
Legal Consequences of Non-Compliance
If you operate without an insurance policy for workers’ compensation as required by law, you will face serious legal consequences. Depending on the jurisdiction, you may even be taken to court if your employee suffered any accidents or injuries during work.
An employer could experience substantial liabilities since they may be bound to pay for their medical expenses and perhaps lost wages. Employees have the right to sue their employers in this scenario and seek compensation for lost wages.
Aside from damaging your reputation, non-compliance with workers’ compensation rules may lead you to have trouble with attracting top talent in your industry. An appropriate coverage is one that could shield your business and offer a safe working ambience to workers. This, in turn, fosters trust and the building of a strong community.
For workers, if the employer or company insurance carrier tries to delay or deny the claim, then it becomes instrumental to have a lawyer. According to workers’ compensation lawyer Stephen L. Mowry, your lawyer can represent you throughout the process so you are not denied compensation that is rightfully yours.
Financial Penalties and Fines
If you don’t have workers’ compensation insurance, you could face big fines and fees that will hurt your finances. Depending on the state, you could potentially be fined a couple hundred to a few thousand dollars per day.
In some areas, these charges could easily reach thousands of dollars, restricting your budget further.
By obtaining the right coverage, you protect your business and your employees as you create a stable environment for them.
Workers’ compensation is a valuable investment and contributes to the eventual success of your enterprise.
Impact on Business Reputation
Neglecting to procure workers’ compensation insurance can result in financial penalties but can also adversely affect your reputation. Clients and potential partners might perceive that one being non-compliant has uncertain regard for employee safety and welfare.
Such suspicion creates distrust and impairs one’s ability to build relationships with the industry.
Reputation is the foundation of your brand, so portraying yourself as irresponsible can only drive customers away. Even employees would want to feel valued and safe.
The creation of a reputable business should begin with the well-being of the employees alongside earnings. Establishing a positive reputation is necessary for the lasting success of a working culture.
Liability for Workplace Injuries
As an employer, by deciding to not carry workers’ compensation insurance, you expose yourself to major liabilities regarding any injury that may happen at the workplace. An injured employee may sue you personally and seek compensation for medical bills, for lost wages, and for pain and suffering.
Laying out the foundation for a safe working environment through workers’ compensation insurance signifies your commitment to the employees’ well-being. Trust is most important in the workplace. At any worksite, maintaining insurance represents one of the steps in providing a supportive environment where everyone feels valued and secure.
Do not let any liability claims destroy the reputation of your company.
Read More: When to Hire a Workers’ Comp Attorney: Recognizing the Signs Your Claim Needs Legal Help
Increased Insurance Premiums and Future Coverage Issues
Choosing to operate without workers’ compensation insurance could cost you more in terms of future insurance premiums. Whenever the insurers saw a non-complying history, the business would then be rated as high-risk.
A premium increase might add strain on your operating budget and make it even harder to compete with business rivals. Without the necessary coverage, you will be practically unable to procure policies later on since insurers tend to shy away from underwriting such risks.
You would not want to be left out, feeling isolated from those benefits engendered by good coverage. Putting workers’ comp insurance first keeps your eyes on your employees, making some ground for them to feel secure and belong in the workplace.
