Workers’ Compensation is a statutory claims system established by Chapter 97 of the North Carolina General Statutes, also known as the Workers’ Compensation Act. The purpose of Workers’ Compensation is to provide compensation to employees who have lost an ability to earn wages due to an accident sustained in the course and scope of their employment. Under North Carolina law, any employer that regularly employs three or more employees is subject to the provisions of the Workers’ Compensation Act and must carry Workers’ Compensation insurance. For a corporation, its officers are automatically included toward the employee count. In contrast, sole proprietors, members of LLCs, and partners are not automatically counted toward their respective organization’s employee count.
I have received a Penalty Assessment Order from the North Carolina Attorney General’s Office, what are my options?
If you have received a Penalty Assessment Order, the Industrial Commission has determined that you are subject to the Workers’ Compensation Act and have failed to carry Workers’ Compensation insurance. Under N.C.G.S. § 97-94(b1), the Industrial Commission is entitled to levy a penalty of $20 to $100 for each day without coverage. As one can guess, the penalty amount can add up relatively quickly.
Once an employer has received a Penalty Assessment Order, the case can go one of two ways. If the employer contends it did not have three or more employees during the alleged time period and, therefore, was not required to carry Workers’ Compensation insurance, it may request a hearing before the commission. Alternatively, if the employer acknowledges that it was required to carry Workers’ Compensation insurance, there are steps it can take to mitigate the penalty.
First and foremost, it is imperative that the employer obtain proper Workers’ Compensation insurance immediately. In order to qualify for consideration for a reduction in the penalty, the Industrial Commission requires penalized employers to submit proof of current coverage within fifteen (15) days of receipt of the penalty notice. The employer may then request that the Industrial Commission rescind the original penalty and impose a reduced penalty. The request should be made in writing within thirty (30) days of receipt of the Penalty Assessment Order. The request should also be accompanied by a full copy of the current Workers’ Compensation policy, all payroll records for the period during which the company was uninsured, and proof of the number of employees covered under the current policy—which also may be in the form of payroll records. From there, the Commission will impose a penalty that roughly equates to the average of what the employer should have paid annually in workers’ compensation insurance premiums, plus 10 percent. Note, however, that if the employer has been penalized for failure to carry Workers’ Compensation insurance before, the Industrial Commission will not reduce the penalty.
Whether or not you believe your business was required to carry Workers’ Compensation insurance, it is crucial that you proactively work with the Industrial Commission to resolve the matter. If you or your business have received a Penalty Assessment Order, it is also strongly recommended that you retain counsel to protect your rights while you navigate the legal landscape of the Industrial Commission.
The attorneys at Bennett Guthrie Latham PLLC have decades of combined experience representing employers in front of the North Carolina Industrial Commission and are ready to assist you with your case.