NOTE: Updated December 2020. Despite businesses across North Carolina experiencing financial struggles related to the COVID-19 pandemic, the Industrial Commission has continued to aggressively investigate employers without workers’ compensation insurance and issuing civil penalties for non-compliance. In recent months, our firm has been made aware of instances where compliant employers have been incorrectly targeted by the Industrial Commission and improperly threatened with civil penalties and criminal citations. If you are a business owner and have been notified by the Industrial Commission about an investigation into your business, received a penalty, or been charged with a criminal offense, please contact Dysart Willis Houchin & Hubbard so we can discuss how we can help.
Dysart Willis Houchin & Hubbard represents employers that have received penalties from the North Carolina Industrial Commission under NCGS § 97-94 for failure to carry workers’ compensation insurance. There have been a variety of recent changes to this area of the law and the practice procedures used by the Industrial Commission. The good news for employers is that following significant revisions to the law in July 2018, these changes have generally been positive. In some situations, these changes have provided significant relief to employers from the Industrial Commission’s prior aggressive policies. This article addresses common questions from employers who have received a penalty from the Industrial Commission and discusses updated areas to the law and procedures for challenging the penalty.
Question: Am I required to have workers’ compensation insurance?
Employers with three or more employees must still carry an active workers’ compensation insurance policy. As revised, the updated NCGS § 97-94 reduces the daily penalty amount that may be assessed against businesses and limits the look-back period for which an employer may be penalized. Failure to carry the necessary insurance can result in a penalty of $20 to $100 per day and may not apply a period of noncompliance occurring more than three years prior to the date of the penalty assessment. The statute continues to allow for misdemeanor or felony charges against business owners that either neglect or willfully fail to bring an employer into compliance.
Questions: Why did I receive a penalty from the Industrial Commission? Can I really be charged criminally?
Employers are often surprised when an investigator from the Industrial Commission contacts the business and issues a criminal citation. Similarly, it can be startling when a Penalty Assessment Order for tens of thousands of dollars arrives by certified mail. The obligation is on the Employer to ensure that the necessary workers’ compensation insurance is in place. Reliance on an insurance agent to advise the business or belief that notice of the requirement will be provided by the State is a mistake. Often, the first time a business owner is made aware of the noncompliance is when the civil penalty has been issued or the criminal citation is served. Speaking with an experienced attorney can help small businesses identify whether they are required to carry workers’ compensation insurance and avoid these costly problems.
In most instances, district attorneys in North Carolina will dismiss the criminal citation upon proof of compliance when the business owner appears in court. It is important not to miss the scheduled court date or additional consequences can result. By hiring an attorney who can appear on your behalf, you can potentially avoid having to come to court yourself. Be advised that just because the criminal case has been dismissed, the business may later be issued a civil penalty that will need to be resolved separately.
Question: Can I reduce the penalty amount?
Helpful for most employers is the addition of an alternative penalty provision to the statute. Eligible employers that have never before been penalized under NCGS § 97-94 and have secured the necessary insurance coverage may file for rescission of the original penalty amount and application of an alternate penalty. The alternate penalty is calculated pursuant to a formula that accounts for the employer’s current premium amount, the number of covered employees, the average number of employees during the alleged period of noncompliance, plus an additional 10% penalty. In most cases, this alternate penalty calculation results in a dramatic reduction from the original penalty amount. Although rare, the alternate penalty may not result in a reduction or the business may not be eligible in which case more creative litigation strategies will need to be explored.
It is important that timely, statutorily compliant filings be submitted to the Industrial Commission along with the required supporting documents. Proof of insurance coverage and payroll records must be provided as exhibits in the correct format to avoid denial of the request or delay in the case. Additionally, an experienced attorney will be knowledgeable about what documents will be helpful in securing the most favorable alternate penalty possible.
Question: Do I need to hire an attorney?
Employers who have received a criminal charge or penalty assessment order from the Industrial Commission are encouraged to contact an attorney who has handled these types of cases. Dysart Willis has successfully helped businesses timely respond to the sensitive deadlines imposed by the Commission, assisted business owners identify their eligibility for an alternative penalty, and taken steps to make otherwise ineligible businesses eligible to apply for an alternate penalty. Additionally, the formula used for calculating an alternate penalty can be confusing and discrepancies often result. In the event of a discrepancy, a hearing before a Deputy Commission may be necessary and it is important that a business owner take the necessary steps to protect their right to have a hearing and have an experienced attorney advocating for the best possible result. Contact our office to discuss your case with attorney Joe Houchin.