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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!

N.C. Officials to Review Regulations after a Report that Thousands of N.C. Employers Don’t Buy Workers’ Compensation Insurance

The North Carolina Industrial Commission announced this month that it will begin a review of its own policies and procedures after the Raleigh News & Observer reported that tens of thousands of North Carolina business owners do not buy workers' compensation insurance, leaving their employees unprotected if they are hurt on the job.

The newspaper reported this month that the state does not track lapses in coverage, even though the Industrial Commission is notified of such instances. The commission also does not usually enforce fines for these violations of the law (up to $100 per day), and cases that are brought before it rarely lead to prosecution or sentencing.

ConstructionWorker_06062014Lack of Protection

Workers' compensation was introduced in the 1930s to protect workers who were injured on the job. In North Carolina, businesses with three or more employees are required to carry the insurance, or they must certify that they have the assets to pay for their liabilities for worker injuries.

However, the report by the Raleigh News & Observer indicated that about 170,000 companies in the state meet this criteria, yet databases show that insurance carriers only covered about 140,000 businesses for workers' compensation insurance.

When workers are hurt on the job and their employers do not carry workers' compensation insurance, they can sue their employer or appeal to the N.C. Industrial Commission to get compensation.

In the fiscal year 2011, the commission received 62,409 such claims, and about 75 percent of them were settled through mediation.

Need for Reform

The report by the Raleigh News & Observer noted that the N.C. Industrial Commission has the power to enforce the requirement that businesses carry workers' compensation insurance, but that it rarely checks for lapses in coverage - which can be monitored through a state-mandated reporting system.

The commission is usually not aware that a business is in breach of the law until an injured worker files a complaint.

This lack of oversight often leaves injured workers struggling to pay mounting medical bills while also being unable to work, and proceedings can go on for years before a resolution is reached. Moreover, according to the article, those businesses who choose not to purchase workers' compensation insurance often do so in an effort to cut costs and stay afloat, so most would not have enough assets to pay for any injuries should a case be decided in a worker's favor.

The legislature approved changes to the workers' compensation system last year but did not address the problem with the lack of coverage. Instead, the new law focused on cutting the amount and length of payment due to injured workers so that the cost of the insurance would go down.

Sen. Doug Berg, D-Franklin, a former deputy commissioner at the Industrial Commission, and a lawyer with the Law Offices of James Scott Farrin, called on Gov. Bev Perdue to make prompt reforms. He told The Charlotte Observer that he will ask Perdue to put reforms in the budget bill for this session.

Berger also said the commission should be required to perform spot checks on workers' compensation insurance to ensure compliance. He also suggested giving more authority to the Department of Insurance to investigate fraud.

Gov. Bev Perdue called on the commission to make immediate changes to correct the problem.

North Carolina Workers' Compensation Lawyers

If you were injured on the job, don't wait to find out if your employer is in compliance of the laws and will be able to provide compensation for your injuries. Call the Law Offices of James Scott Farrin at 1-866-900-7078 to find out how we may be able to help you. We have experienced North Carolina workers' compensation lawyers who may be able to fight to get you the compensation you may deserve.

Management Has More Influence on Number of Workplace Injuries, Study Says

Workers can often be blamed for their injuries on the job. Employers may assume that they have been careless or haven't followed saConfident1_07312014fety protocols. Yet, according to a new study by the University of Georgia, it turns out that upper-level management may have much more influence on workplace safety and the rate of workplace accidents.

The study - published this month in the Journal of Safety Research - found that when management fostered the perception of a positive safety climate among employees, the number of workplace injuries went down 32 percent. Day-to-day practices were more influential than written safety protocols.

When employees felt that a company ran smoothly and that there were minimal constraints on their performance, the injury rate dropped as much as 38 percent, the study found.

"Injury is a failure of management," said study co-author Dave DeJoy, a professor of health promotion and behavior at UGA. "Organizations who blame individuals for injuries do not create a positive safety climate."

The study, co-authored by DeJoy and recent doctoral graduate Todd Smith, is one of the first to examine the perceptions of workplace safety climate among a diverse sample of occupations and workers.

Work-Life Balance

In addition to the culture of workplace safety that employers establish, an imbalance between work and family life was also found to affect the rate of workplace injury. The study found that when workers felt that their work life was interfering with their family life - or vice versa - the rate of injuries rose 37 percent.

"We used to think work was one thing and family was another, but now there is a realization that work-life balance affects performance and productivity," DeJoy said.

The study looked at nine factors that may influence workplace safety: relations between management and employees, safety climate, the effectiveness of the workplace, type of work, the potential for promotion or other advancement, the adequacy of resources, employee work-life balance, support provided by management, and worker participation. The study also considered the ethnic background of workers.

To see the full study, visit

North Carolina Workers' Compensation Lawyers

The study shows how important it is for employers to create a positive safety culture for employees - one that doesn't just put safety measures in place but that actively promotes the importance of safety. If you or a loved one has been injured on the job, you may be able to receive compensation for your injuries. Contact the Law Offices of James Scott Farrin for a free and confidential evaluation of your case.

Contact Information

Asheville Law Office

300 Ridgefield Court Suite 309
Asheville, NC 28806
Phone: 828-552-8215
Toll Free: 1-866-900-7078

Charlotte Law Office

301 S McDowell St, Suite 900
Charlotte, NC 28204
Phone: 704-599-1078
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

2915 Raeford Road, Suite 204
Fayetteville, NC 28303
Phone: 910-488-0611
Toll Free: 1-866-900-7078

Goldsboro Law Office

1308 Wayne Memorial Drive, Suite B
Goldsboro, NC 27534
Phone: 919-731-2581
Toll Free: 1-866-900-7078

Greensboro Law Office

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

Greenville Law Office

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

Henderson Law Office

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

Morganton Law Office

216 N. Sterling Street, Suite B
Morganton, NC 28655
Phone: 828-219-3080
Toll Free: 1-844-520-2894

New Bern Law Office

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

Raleigh Law Office

4325 Lake Boone Trail, Suite 100
Raleigh, NC 27607
Phone: 919-834-1184
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

144 Woodridge Court
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