What Are The Consequences Of Not Having Workers Compensation?

December 16, 2019

If you’re the owner of a business – large, medium or small – and you haven’t purchased workers compensation insurance, you could get into some real hot water. While you might think that you can save money by not buying it, chances are you could end up incurring some hefty penalties or even be looking at jail time depending upon which state your business operates in, if you’re found to be without it; a pretty big price to pay for trying to cut costs.


So, let’s look in more detail at the consequences of not having workers compensation:


Workers compensation insurance is mandatory for most businesses:

It doesn’t really matter whether, as a business owner, you believe it to be an unnecessary expense to purchase workers comp, since almost every state in the country requires businesses to carry it by law, once they reach a certain number of employees. This threshold varies from state to state, but even if your business is small and you only have one employee, you’ll probably still be required to purchase it. Companies with fewer than 5 workers may escape the mandatory insurance requirement, but if in doubt, it’s best to check with a business insurance specialist before you get yourself into trouble. Complying with state labor laws as an employer and business owner is always advisable, as not only could you face stiff penalties and/or jail time if found to be noncompliant, but you could face criminal charges of fraud as well.


What are the penalties for not having workers comp?

Again, penalties vary from state to state, but some examples of fines are as follows:


  • New Jersey – failure to carry workers comp insurance is an offence punishable by law and can lead to huge fines of up to $10,000 and even imprisonment for a term of up to 18 months.
  • Illinois – in Illinois, failing to comply carries a misdemeanour charge, but if you’re found to have wilfully and actively failed to purchase this type of insurance as a business owner, then you’ll likely be charged with a felony.
  • Pennsylvania – if you’re found to intentionally be noncompliant with the law regarding workers insurance, then you could face a whopping 7 years in jail, or a hefty fine of $15,000.


Who enforces workers compensation insurance laws?

It usually falls to local law enforcement, business regulatory bodies and the insurance fraud department of the government, to ensure that businesses possess workers compensation insurance.


To find out whether you need workers compensation insurance as an employer and/or owner of a small business, schedule an appointment with a local, trusted insurance firm.

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