Why do Employers need workers’ compensation coverage?
In 2005 the law changed for employers that failed to obtain workers’ compensation insurance. The Injured Workers’ Benefit Fund 820 ILCS 305/4 (d) was established to compensate employees that had been injured while in the employment of an uninsured employer.
Workers’ compensation insurance is the law in Illinois for employers and as a result employers are generally required to provide workers’ compensation insurance for employees. In certain cases a company is not required to insure certain employees although over 90% of all employees are required to be insured in Illinois.
Those employers that do not comply with the law according to the State of Illinois are in an unfair competitive advantage over law abiding businesses. Consequently the State of Illinois has imposed compensatory as well as punitive damages to deter employers from breaking the law and employers must make sure that employees are insured from the moment they are hired.
The Consequences for not carrying workers’ compensation insurance are:
- $500.00 a day penalty for everyday of non compliance.
- Minimum fine of $10,000.00 for willful non compliance.
- Corporate Officers can be held personally liable
- Employers that negligently fail to obtain workers’ compensation insurance and comply with the act can be found guilty of a Class A misdemeanor
- Willful non compliance subjects the employer to a Class IV Felony
- Employees can bring the employer to civil court where damages can be unlimited and the burden of proof shifts to the employer
- Out of state employers are responsible to have workers’ compensation insurance in Illinois if an employee has potential for an injury in Illinois and if they have an employee in Illinois or hire an employee in Illinois.
In consequence employers must have insurance or hire a Lawyer to help if they are not insured. The consequences are serious.
The Employee and Employer Relationship:
Many companies have what the employer believes is an independent contractor agreement and therefore the employer may think that they do not need insurance. Independent contractor agreements will not protect the company from the requirements of the Workers’ Compensation Act. The law only considers the independent contractor agreement to be one of many factors in determining if someone has an employer /employee relationship.
Many employers also believe if the employee receives a 1099 then the so called independent contractor does not need workers’ compensation insurance and that insurance is unnecessary. The fact is employers are wrong when they think the 1099 and the independent contractor agreement protects them from liability under the Workers’ Compensation Act. The law is clear that issues such as who supplies the tools and control over the worker will carry a sufficient amount of weight in determining if workers’ compensation is required.
Gary A. Newland at the law firm of Newland & Newland, LLP is experienced in representing employers that are not insured and employees against uninsured companies.
If you have any questions please contact Gary at 847 797-8001.