Workers’ comp fines soar amid crackdown

Stepped-up enforcement in the wake of The Station nightclub fire, bolstered
by technological improvements and manpower, has drastically increased the amount
of fines employers are paying for failing to carry workers’ compensation insurance,
state officials say.



In 2003, the Workers’ Compensation Fraud Prevention and Compliance Unit at the state Department of Labor and Training collected $286,876 in penalties, up from $87,514 the previous year and $43,955 in 2001, according to unit chief Julie Tamuleviz; that’s a 546 percent increase in three years.



As of July 22, Tamuleviz said, $185,000 had been collected, putting the unit on track to collect 15 percent more penalties this year than in 2003.



A big part of the jump, Tamuleviz and her boss, Associate Director E. Jean Severance acknowledged, is due to a new enforcement push triggered by last year’s fire at The Station, which was found not to have carried workers’ compensation insurance.



But the unit also has far more manpower, they said: seven investigators, instead of just one, as a result of a 2002 merger of the fraud and compliance units.



And the information age has made it much easier to keep track of employers. Tamuleviz’s unit now gets immediate, electronic notification from carriers of new policies, changes, cancellations and non-renewals – a major improvement from just a few years ago, when the information was transmitted by postcard.



The carriers’ data can also be cross-checked with the unemployment tax database, which lists every employer’s total payroll by quarter. One of the quickest ways to catch violators these days, Tamuleviz said, is to see who’s listed on that database but doesn’t appear on the workers’ comp coverage database.



A new legal weapon has strengthened the crackdown even more: Since July 31 of last year, the Workers’ Compensation Division has had the power to stop the operations of a company that doesn’t have coverage. In addition, a penalty of up to $1,000 per day of non-compliance can be assessed.



Five employers so far have been processed under the new law, Tamuleviz said, and three have had stop-work orders issued: Town Chef, in West Warwick; Instant Plumber, in Cranston; and Domestic Paint & Gutter Inc., in Warwick.



All three quickly got coverage, Tamuleviz said – two by the end of the day. Many others, she added, have rushed to get coverage as soon as they got a letter from her unit asking for proof of insurance and warning of the consequences of non-compliance.



“The threat is very, very effective,” she said.



State law requires any employer with one or more employees to carry workers’ compensation insurance. The vast majority of Rhode Island employers have policies with Warwick-based The Beacon Mutual Insurance Company or other carriers, and 47 are currently self-insured, Severance said, down from 185 in 1991.



Workers can choose to waive coverage, Tamuleviz said, but it’s a risky thing to do. While workers’ compensation is a no-fault system, she explained – meaning that on-the-job injuries are covered regardless of whose negligence may have caused them – an employee who has waived coverage must prove that the employer was to blame.



Employers, on the other hand, risk personal liability for workers’ injuries if they don’t carry insurance, Tamuleviz said, and can be made to pay both for lost wages and for medical costs (regular health insurance won’t cover work-related injuries).



After The Station fire, Severance said, many employers apparently realized on their own that they should get coverage. Beacon especially reported “a lot of new policies,” she said, “so I think people learned a lot from that tragedy.”



Many employers, however, did not. That’s where stepped-up enforcement has made a difference.



After The Station fire, Tamuleviz said, her unit sent out letters reminding employers that workers’ compensation coverage is mandatory, and it began sending out pamphlets to newly registered employers to make sure they sign up right away.



The investigators have also begun doing “industry sweeps,” Tamuleviz said. First on the list, due to the problems highlighted by the fire, were liquor-license holders; 1,725 were checked, and 5.6 percent – almost 100 – were caught without insurance.



Next were auto-repair shops, Tamuleviz said, and now landscapers are being checked, this being the height of their employment season. Severance said such sweeps are a particularly effective way to enforce the law, because investigators can learn about a single industry and apply the knowledge to multiple cases at once.



One problem the state’s enforcement efforts won’t address, Tamuleviz and Severance acknowledged, is employers who do get workers’ compensation coverage, but don’t report the full size of their staff, or the true nature of employees’ jobs.


If her unit comes across such a case, Tamuleviz said, it would refer it to
the Division of Taxation and to the insurance carrier. But in general, it’s
up to the carriers to monitor their policyholders, she said. If they catch someone,
her unit can step in again – but this time not as a compliance issue. “That
can be premium fraud,” she said.



No posts to display