The 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!