Civil Penalty Increased for Noncompliance with Virginia Workers’ Compensation Insurance Laws

10/01/2014

Uninsured employers shall be assessed a civil penalty, subject to a maximum of $250 per day of noncompliance and subject to a maximum civil penalty of $50,000.

The 2014 General Assembly approved an increase in the civil penalty imposed when an employer required to insure under the Workers’ Compensation Act fails to insure. The law change amended section 65.2-805 of the Workers’ Compensation Act, which previously imposed which a civil penalty of at least $500 and up to $5,000 for each period of being uninsured. The new provision provides that employers shall be assessed a civil penalty of not more than $250 per day for each day of noncompliance, subject to a maximum penalty of $50,000, plus collection costs, which constitutes a significant increase in the potential penalty. The amendment was approved March 7, 2014 and became effective on July 1, 2014.

Workers’ compensation coverage requirements are complex, but focus on the number of employees. Employers in Virginia are required to insure when they regularly employ three or more employees. It is important to be aware that an “employee” is defined broadly under the Act and includes every person in the service of another under any contract of hire, written or implied. “Employee” includes statutory employees (subcontractor’s employees), corporate officers, minors, undocumented workers, working family members, apprentices, temporary and seasonal employees. A business that doesn’t count all of its employees may not realize it is required to carry coverage.

Employers should also be aware, designating a worker as an “independent contractor” does not necessarily mean they are not an employee. Workers’ compensation looks to whether the business exerts control over the manner and means of how the work is performed. In the event of a claim, the facts of the work circumstances will determine if the individual is covered for workers’ compensation, regardless of payment on a 1099 designation.

Please contact an attorney or the Virginia Workers’ Compensation Commission to check your coverage and avoid coverage gaps. Uninsured employers and new businesses are urged to familiarize themselves with workers’ compensation insurance coverage requirements, obtain coverage when required, be compliant and avoid a penalty. Workers’ compensation is mandatory coverage. It is required by state law, and no other form of insurance may substitute. Failure to have coverage due to lack of knowledge is not a valid excuse for failure to insure.

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