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NC Cracking Down on Enforcement of Workers’ Compensation Rules

“There are a lot of people that don’t have workers’ compensation coverage,” says Jack Bayliss, an attorney with Carruthers & Roth in Greensboro. “If you have a corporation, and you’re the president, and someone’s a secretary, and you have one employee, that still counts as three people.”

Grainger Pierce, attorney with Nexsen Pruet who practices in Greensboro and Charlotte, says the crackdown began after an investigative report by the Raleigh News & Observer revealed a discrepancy of about 30,000 businesses between the records of two different regulatory agencies. The N.C. Rate Bureau, the Raleigh-based organization that sets standard insurance rates, plans and job classification systems, noted about 140,000 businesses in the state with workers’ compensation insurance — even though the state Department of Commerce noted about 170,000 businesses that would qualify on its books. Pierce says the N.C. Industrial Commission has started to seek affirmation on the front end that businesses have proof of coverage, rather than waiting to act until after something goes wrong.
“If you’ve got somebody without coverage or assets, and an employee gets hurt, you’ve essentially got a wrong without a resource,” Pierce says.  The state statute dictates that if a company doesn’t have workers’ compensation coverage, the commission can levy a penalty of up to $100 per day per employee for each day the company did not provide insurance, Bayliss says, adding that the penalty can be backdated to the formation of the company.
Employers could even face criminal charges if they willfully fail to have the insurance, Bayliss says. In May, the Industrial Commission published a contempt hearing docket, which called out many employers who had previously received workers’ compensation claims but had not paid. At those hearings, the commission threatened employers with jail time unless they took steps to settle their claims, according to a report from the McClatchy-Tribune news service.
The commission has also announced its intent to schedule regular contempt hearing dockets in coming months. Failing to comply can bring harsh penalties, regardless of whether the company was intentionally negligent or simply confused. Some small businesses think their liability insurance covers the necessary workers’ compensation protection, but that’s not the case, says Cal Adams, an attorney with Womble Carlyle in Winston-Salem.
“Everybody basically — small businesses, big business — in North Carolina has to have it,” Adams says. Adams recommends that companies check with their insurance agent annually to make sure each of the businesses’ insurance policies is up to date. “They’ve got a number of different insurance policies, and they need to be checking just once a year to make sure if they’re all in place,” Adams says. “If something goes wrong, you can bet your bottom dollar it’s the place where they let their insurance lapse. And then their out of pocket is going to be huge, as compared to that 30 minute phone call to check.”
Beyond that phone call to check in with your insurance agent, workers’ comp experts have some solid tips for small businesses to stay in compliance with regulations and minimize their risks.  If you have questions about about your insurance coverage for your business, please contact us for a comprehensive exposure analysis.
Content by Catherine Carlock – Special Reports/Publications Writer- The Business Journal