Complete Guide to New York Workers’ Compensation Insurance for Business
Did you know that every day in the U.S., an average of 12,300 workers are injured? This means, about every seven seconds, somewhere in the U.S., a worker is injured. In the New York private sector alone, more than 139,000 nonfatal injuries and illnesses were reported in 2016. Of course, some occupations are more dangerous than others, but no job is immune to hazards. Some injuries or illnesses may be minor while the most extreme cases could be fatal. So, how do businesses respond when one of their workers has suffered negative physical effects on the job?
This is where workers’ compensation insurance comes in. This form of insurance protects businesses and employees. As with other types of insurance, you pay premiums to maintain your coverage, and if an incident occurs, your insurance company steps in to help. Of course, an insurance company can’t heal your injured or sick worker, but they can help cover costs associated with your employee’s medical treatment and recovery — costs that would otherwise fall on you or your employee.
In this post, we’ve put together a workers’ compensation insurance guide for New York that covers what employers need to know about workers’ compensation insurance before they ever hire that first employee. We’ll answer some common questions related to workers’ comp, such as why you should get it, whether it’s required, what it covers, how much it costs and how to obtain it.
Why Should I Have Workers’ Compensation Insurance for My New York Business?
Since you have to pay regular premiums for workers’ compensation insurance, you want to know whether it’s a worthwhile cost. After all, no one wants to pay for something they don’t really need. So, why should you have workers’ compensation insurance for your business?
For businesses in New York as well as most other states in the U.S., the number one answer is simply that it is a legal mandate. According to New York law, for-profit businesses in New York State are required to have workers’ compensation coverage for all of their employees. It doesn’t matter whether your insurance policy comes from the New York State Insurance Fund or a private insurance carrier as long as you have coverage for all employees and can show proof of your policy. In rare cases, some businesses choose to be self-insured, which also counts.
Some business owners may be tempted to lament the fact they have to pay for workers’ compensation. The good news is that, even if workers’ comp weren’t required by law, it would still be a smart move for your business. Workers’ comp protects both employees and employers. Any time an employee experiences an injury or an illness related to their work, they may have to have medical treatment and may have to stay home to recover for some time.
In the case of no insurance, the employee would be out the expense unless they chose to sue their employer for compensation. One of these scenarios is very bad for the worker, and the other is very bad for the employer. When a business has workers’ compensation insurance, it’s helpful for both the employee and the employer.
New York ascribes to a no-fault workers’ compensation system, meaning it doesn’t matter who is at fault in the case of an injury. Workers will receive compensation regardless and are not allowed to sue their employers for additional money. So, with workers’ comp, the employee receives the benefits they need, and the employer doesn’t have to worry about an expensive lawsuit.
Is Workers’ Compensation Required in New York? Are There Any Exceptions?
Workers’ compensation is a legal requirement for businesses in New York. Note that we’re talking about for-profit businesses. Non-profits embody an entirely different category. While the blanket requirement is that for-profit businesses must cover their employees with workers’ comp, there are some exceptions to this rule. Let’s look at four common questions from businesses that think they may be the exception and what the New York workers’ compensation guidelines have to say.
1. Do Small Business Owners Need Workers’ Compensation?
Small businesses may think they’re not big enough to warrant having workers’ compensation. The reality is that all businesses are required to have workers’ comp regardless of size. Even if you only have one employee, you’re still required to have workers’ compensation insurance for that one employee. The mandate for workers’ comp insurance also includes any family members, borrowed or leased workers, part-time workers or volunteers you employ. So, even though you may be small, you still need to have a workers’ comp insurance policy.
2. Do I Need Workers’ Comp If I Am the Only Employee?
Being a small business is one thing, but being a single-person business is another matter. If you are the sole owner and you don’t employ anyone else, then this is a valid exception to the requirement for workers’ comp. Keep in mind that this means you don’t have any employees of any kind, not even unpaid volunteers. This same exception applies if your business doesn’t have any employees and is either a partnership or is a one- or two-person corporation without any other stockholders.
3. Does My New York LLC Need Workers’ Compensation Insurance? Does a Single Member LLC Need Workers’ Compensation Insurance?
In New York, a Limited Liability Company (LLC) is treated the same as a partnership. If your LLC does not have any employees, then you do not need to have workers’ compensation insurance. However, you can still elect to purchase workers’ comp insurance. If you do, then it will cover the members of your LLC. If your LLC does have employees, then you must have workers’ compensation insurance coverage for them. The members of your LLC won’t be included in that coverage unless you fill out a C-105.32 form.
4. Do I Have to Pay Workers’ Comp for Independent Contractors?
The short answer to this question is no. Since independent contractors are not the same as employees, you aren’t responsible for having workers’ comp insurance for them. However, subcontractors should be covered by workers’ comp. Therefore, if you hire a contracting company who has subcontractors working for them, you are entitled to require your contractor to have workers’ compensation insurance coverage for all their subcontractors.
What Will Happen If I Don’t Have Workers’ Compensation Insurance?
We’ve looked at why you should have workers’ compensation insurance for your employees and some exceptions to the requirement. But, you still may be wondering what the consequences for not having workers’ comp would be.
If you’re legally required to have workers’ comp insurance — that is, if your business is not one of the exceptions — but you don’t, then you’ll have to deal with unfortunate legal ramifications. If the Workers’ Compensation Board asks to see proof that your business has workers’ compensation insurance, and you fail to provide this proof within 10 days, then the board will determine that you are in violation of the law. Depending on what type of business you are, one of the following individuals or groups will be held personally responsible:
- Sole proprietor
- President, secretary and treasurer of a corporation
Three different penalties could follow according to New York law, depending on the number of employees you have and whether this is your first offense:
- First offense with five or fewer employees: If you have five or fewer employees and have failed to secure workers’ compensation for them within a 12-month period, and if it’s the first time this has ever happened, then your offense is considered a misdemeanor, and you are required to a pay a fine anywhere from $1,000 to $5,000.
- First offense with more than five employees: Even if it’s your first offense, if you have more than five employees and fail to have workers’ compensation coverage for them, you can expect a heavier penalty. This offense is considered a class E felony, and you’ll be fined anywhere from $5,000 to $50,000.
- Repeat offense: If you have a previous conviction for failing to have workers’ compensation insurance for your employees from some time in the past five years, and you make the same mistake a second time, then this time, it counts as a class D felony which carries with it a fine of at least $10,000 and as high as $50,000.
These are the penalties you should be prepared for if you are found to be without workers’ compensation insurance. But what if one of your workers suffers an occupational injury or illness?
In this unfortunate instance, you, the employer, will have to pay compensation and cover medical costs for that employee. The medical costs alone could be in the hundreds of thousands of dollars in the case of a severe injury. In addition to compensating your employee, the law states that you will be liable for a $1,000 penalty for every 10 days that you were not in compliance with the law. This penalty is capped at twice the amount of the cost of compensation for your payroll for the period that you were not in compliance.
What Will a Workers’ Compensation Insurance Policy Cover?
Hopefully, by now, you have a firm idea of whether you need workers’ compensation insurance. So, let’s shift our focus to what workers’ comp actually covers. In a nutshell, workers’ compensation covers medical bills and wage replacement for workers who experience a work-related injury or illness and death benefits for the dependents of those who suffer a fatal injury or illness.
The most common types of injuries workers experience on the job in the U.S. are due to:
- Impact with equipment or an object
- Slips, trips and falls
Most people have a better idea of what might constitute an occupational injury but may not know what an occupational illness looks like. In New York, the most common occupational illnesses fall into the following four categories:
- Hearing loss
- Skin disorders
- Respiratory conditions
Regardless of what type of injury or illness an employee experiences, if it’s related to their work, then it should be covered by workers’ compensation. When a person becomes sick or hurt, workers’ compensation will cover the cost of medical treatment directly related to the injury or illness. In the case where an employee needs to stay home for more than seven days to recover, workers’ comp will also pay for wage replacement, meaning the employee will continue to be paid while they’re recovering.
In the sad case of a work-related death, workers’ compensation will provide death benefits to the deceased workers’ dependents. Typically, these benefits will come in the form of weekly cash payments that constitute a portion of what the deceased worker was earning before their death. Workers’ comp may also pay the worker’s funeral expenses so the family doesn’t have to.
How Are New York Workers’ Compensation Insurance Premiums Calculated? How Much Does It Cost?
A variety of factors go into determining how much you’ll pay in premiums for your workers’ comp policy, so there’s no easy answer to how much you’ll pay. It could be anywhere from under $100 a year per employee to thousands. In New York, the factors that determine the cost of your insurance include:
- The number of workers you employ
- Your annual payroll
- The type of work your employees do
- Past accidents and compensation claims associated with your business
The first two items in that list are pretty straightforward, but you may not be sure where your business falls when it comes to how hazardous the work is for your employees. The New York Compensation Insurance Rating Board (NYCIRB) has determined a risk classification code for every occupation based on how hazardous it tends to be. Of course, each business is unique, but companies within the same industry tend to experience similar hazards. Examples of the most hazardous occupations include policing, shipping, manufacturing and more.
Your classification code is multiplied by an experience modification rate, which is based on your company’s history of injuries and claims. Finally, your company’s payroll per $100 is factored in to result in your insurance premium cost.
How Do I Get a Workers’ Compensation Insurance Policy?
We hope our guide to New York workers’ compensation insurance has helped to answer your questions and has demonstrated why workers’ comp insurance is so important for New York businesses. If your next step is to look for a workers’ comp insurance policy for your business, then consider working with Kokkoris Insurance Services. As an experienced insurance broker, we have the expertise to walk you through the process and get you the coverage you need.
For a quarter of a century, our dedicated service representatives have worked with a variety of businesses and have taken a personal approach to each and every company we serve. If you have any remaining questions about workers’ comp in New York or want to learn more about how Kokkoris can help, give us a call today at 718-728-0606 or contact us online. A member of our team will be happy to speak with you and do whatever we can to meet your needs.