Having just returned from the annual Pennsylvania Workers' Compensation Practice and Procedure symposium, it's evident that the only constant in the workers comp arena remains what a huge headache it is for employers. Sure, the price for workers' compensation insurance has been declining recently, but proper compliance remains a challenge. These are not minor issues folks. Screw up here and you may find yourself out of business, in jail, or both!



Because I have with both the insurance industry and the legal profession, I am occasionally conflicted about what the right answer ultimately is in any particular employer / employee situation. However, if you employ people, you absolutely MUST carry workers compensation insurance. No exceptions, unless of course your employees are all Amish.

The requirement

The Pennsylvania Workers' Compensation Act mandates that employers pay for the medical bills of workers who suffer a job related injury or illness. If the employee is unable to work due to the injury, wage loss benefits are also required until the employee is able to return to the job. If the worker is killed or later dies, death benefits are paid to the worker's dependent survivors. The employer has the choice of buying coverage to pay for these benefits from a private insurance company, from the State Workers Insurance Fund (SWIF), or self-insuring.

The Pennsylvania Department of Labor and Industry website outlines who is subject to the requirements of the Act:

The requirement to insure workers' compensation liability is mandatory for any employer who:

a. Employs at least one employee who could be injured or develop a work-related disease in this state, or

b. Could be injured outside the state if the employment is principally localized in Pennsylvania, or

c. Could be injured outside the state, while under a contract of hire made in Pennsylvania, if the employment is not principally localized in any state, if the employment is principally localized in a state whose workers' compensation laws do not apply or the employment is made outside the United States and Canada.

Some employers foolishly don't think this applies to them if they use seasonal or part-time workers. Not true. It also doesn't matter if the business or organization is a non-profit, partnership, corporation, LLC, sole proprietorship, etc...

What if I "blow off" the requirement?

The short answer is that you can incur both civil and criminal liability. Section 305 of the Pennsylvania Workers' Compensation Act states that an employer's failure to insure its workers' compensation liability is a criminal offense. Every day an employer fails to insure is a separate offense. Depending on the situation, the crime will be classified as a third-degree misdemeanor or a third-degree felony. So what does all that mean? In Pennsylvania, a third-degree misdemeanor conviction can get you a $2,500 fine and up to one year in jail for every day you are non-compliant with the Act. A felony conviction can result in a $15,000 fine and up to seven years imprisonment for each day of non-compliance. Not enough to convince you yet? Not only does an uninsured employer face criminal charges, the employer is subject to civil liability as well. An injured employee can now sue the employer for work-related injuries or diseases. Such suits are normally barred if the employer maintains workers' compensation insurance. Furthermore, it is very likely the employee will win an amount that is much higher than they would have been awarded under workers' compensation. The court will also require the employer pay court costs and the cost of prosecuting the case. OUCH! A recent example of what can happen.

On January 22, 2008, a local roofing company and its owner, each pled guilty to nine misdemeanor counts of the third degree in the Bucks County Court of Common Pleas for failing to insure its workers' compensation liability. The owner was given seven years of probation and also had to pay restitution in the amount of $93,108.06 to an injured employee and payment of the cost of prosecution. The company was also sentenced to pay restitution and prosecution costs. The company is out of business.

They'll never catch me?

Maybe. Maybe not. But did you know that if one your competitors' thinks you are operating without workers' compensation insurance they can have you investigated? Not a bad deal. Pick up the phone, call Labor and Industry, and eliminate the competition. I don't know about you but I wouldn't want my future in the hands of an adversary. Quite frankly, with workers' compensation insurance being readily available at historically reasonable prices, there is simply no reason to risk criminal and civil penalties for non-compliance.