September 15, 2011

Upon forming a new entity for your practice, or in operating your existing entity, there are a laundry list of requirements to follow as an employer. One such requirement I recently had an issue with for a client is workers comp. The situation was that a client controlled an entity that was leasing employees from another company. Workers compensation audited the entity and found no workers comp insurance was in place. My client, prior to retaining counsel, claimed that his entity had no employees, he just leased them. Workers compensation did not accept this answer and fined my client for the failure to have workers compensation, as well as adding bundles of interest to the fine for the time period of non-compliance. Thankfully we were able to successfully resolve this issue for the client with minimal damage and the reason I bring this situation to light is because having exposure with workers comp is easily avoidable - you just need to know when you need to have coverage. My client's thought process had been (probably a fairly common misconception) that he did not need workers comp for leased employees because they are only leased and the other company that employs them has workers compensation insurance. This is incorrect.

The rationale governing who is required to have workers compensation is simple - should an employee be injured on your site when performing services for your practice, your practice is required to have insurance to cover that injury.

Who Is Covered By The Workers' Compensation Law is explicitly covered on the Workers Comp website and states, in relevant portions, the following:

Virtually all employers in New York State must provide workers' compensation coverage for their employees (WCL section 2 and 3). Employers must post notice of coverage in their place(s) of business (WCL section 51). Employers must cover the following workers for workers' compensation insurance:

1. Workers in all employments conducted for-profit. Part-time employees, borrowed employees, leased employees, family members and volunteers working for a for-profit business must also be covered under the Workers Compensation Law (WCL section 3-Groups 1-14-a);...

8. All corporate officers if the corporation has more than two officers and/or two stockholders (WCL section 54[6]);

9. Officers of one-or-two person corporations if there are other individuals in employment. These officers may choose to exclude themselves from coverage (WCL section 54[6]);.... section 54[6]);....

Not sure if you have the right coverage? Please contact your insurance broker, and if you do not have a broker, feel free to ask me for a referral.

And, if you find yourself being audited by Workers Compensation, be sure to hire counsel to assist to ensure you are treated fairly and to represent your interests.


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