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Employees Paying for Workers’ Compensation Loophole, Newspaper Reports

Law3_07312014The cost of workers' compensation insurance can be very costly for some businesses. According to a new report from the News & Observer, some businesses are finding ways to get around paying these premiums by using a loophole in which they declare their employees to be "contractors" - a move that is costing some injured workers the benefits they are supposed to receive by law.

In North Carolina, businesses with three or more employees are required by law to buy workers' compensation insurance. If they don't want to purchase insurance, they can show they have the funds to cover liability for any potential workplace injuries.

The newspaper reports that some employers are using a loophole that allows them to declare themselves sole proprietors and their employees contractors. They then purchase what is known as a "ghost policy," which provides coverage for one person as a failsafe in the event that the "sole proprietorship" hires an employee within the year.

According to the newspaper, the ghost policies cost about $1,000 a year, compared to tens of thousands of dollars a year for workers' compensation insurance premiums for some businesses.

One worker featured in the investigative article became injured in a wreck when another employee fell asleep at the wheel. The man became paralyzed from the neck down, and doctors expect his medical care to cost as much as $8 million. His employer had purchased a ghost policy, which didn't provide benefits for the man.

His case is currently being litigated to determine who is liable for paying for his injuries.

The News & Observer reported in April that at least 30,000 businesses in North Carolina have not purchased workers' compensation insurance. It is unclear how many businesses have incorrectly classified employees as contractors in order to purchase ghost policies.

By labeling employees "contractors," employers also avoid having to pay Social Security, unemployment, and insurance for these workers.

The North Carolina Rate Bureau has reported that there are about 16,000 ghost policies for high-risk employers who could not buy workers' compensation insurance, according to the N&O.

North Carolina Workers' Compensation Lawyers

If you have been injured on the job, the North Carolina workers' compensation lawyers at the Law Offices of James Scott Farrin may be able to help you. Call 1-866-900-7078 right now for a free evaluation of your case!

Contact Information

Raleigh Law Office

5848-100 Faringdon Place
Raleigh, NC 27609
Phone: 919-834-1184
Toll Free: 1-866-900-7078

Durham Law Office

280 South Mangum Street, Suite 400
Durham, NC 27701
Phone: 919-688-4991
Fax: 800-716-7881

Fayetteville Law Office

517 Owen Drive
Fayetteville, NC 28304
Phone: 910-488-0611
Toll Free: 1-866-900-7078

Charlotte Law Office

201 McCullough Drive, Suite 220
Charlotte, NC 28262
Phone: 704-599-1078
Toll Free: 1-866-900-7078

New Bern Law Office

1505 South Glenburnie Rd, Unit P
New Bern, NC 28562
Phone: 252-634-9010
Toll Free: 1-866-780-3422

Greenville Law Office

702 G Cromwell Dr.
Greenville, NC 27858
Phone: 252-355-5205
Toll Free: 1-866-780-3227

Greensboro Law Office

300 N. Greene Street, Suite 850
Greensboro, North Carolina 27401
Phone: 336-665-7072
Toll Free: 1-866-900-7078

Goldsboro Law Office

214 South William Street, Suite 3
Goldsboro, NC 27530
Phone: (919)-731-2581
Toll Free: 1-866-900-7078

Henderson Law Office

514 Dabney Drive, Suite 200
Henderson, NC 27536
Phone: 252-492-4600
Toll Free: 1-866-900-7078

Roanoke Rapids Law Office

709 Julian R. Allsbrook Highway
Roanoke Rapids, NC 27870
Phone: 252-537-9670
Toll Free: 1-866-900-7078

Rocky Mount Law Office

3202 Sunset Avenue, Suite B
Rocky Mount, NC 27804
Phone: 252-937-4730
Toll Free: 1-866-900-7078

Sanford Law Office

703-B South Horner Boulevard
Sanford, NC 27330
Phone: 919-775-1564
Toll Free: 1-866-900-7078

Wilson Law Office

2315 Airport Blvd Suite A
Wilson, North Carolina 27896
Phone: 252-246-9090
Toll Free: 1-866-900-7078

Winston-Salem Law Office

301 N. Main Street, Suite 2409-C
Winston-Salem, NC 27101
Toll Free: 1-866-900-7078