Creates a private right of action against non-compliant employers

Summary of provisions

Section 1: Workers' Compensation law is amended with the addition of section 138, whereby establishing "private right of action" for employees, employee's dependents and insurance carriers for the filing of a civil suit against an employer.

If a claim for compensation is filed by either an employee, an employee's dependents or insurance carrier, and the employer has failed to secure payment of compensation in accordance with sections 26, 26-A and 50 of the Workers' Compensation law, such employee, employee dependent or insurance carrier may institute an action in a court of competent jurisdiction and file an action against such employer.

A notice shall be issued beginning ninety days after the employee or insurer has provided notice of complaint and served such notice.

A plaintiff that commences an action shall be entitled to 25% of the employer's unpaid premium or twenty-five thousand dollars. In addition, plaintiff is entitled to all court costs and reasonable attorney's fees.

Section 2: Effective date of bill.

Justification

This bill amend the State's Workers' Compensation article 7 and gives employees, business competitors and others the power to sue a New York State employer for failing to pay its Workers' Compensation insurance premiums. This amendment to the workers' compensation law creates a private right of action if an employer violates the Workers' Compensation statute, which in effect allows for workers and businesses to not have to rely on the state to take legal action against these companies. Though the state insurance fraud bureau is responsible for taking action against companies, the amendment to this bill will assist them in going after employers cutting corners on Workers' Compensation Insurance.

Indications are that problems exist in many industries where such costs are high, such as construction, janitorial, domestic help and certain health care services. There are also indications where the problem is most acute in risky specialty areas like steel erecting,

bridge painting, and logging, where workers' compensation insurance premiums can run between 50 to 80 percent of a company's total payroll. In addition, there are companies that are trying to be the lowest bidder on a contract and are sometimes tempted to pare costs by misclassifying workers as independent contractors to avoid coverage. Also, a misclassification of workers in high-risk jobs exist as these workers are doing less dangerous work in order to save on premiums and assisting in omitting some workers from payroll logs despite actually working or not paying for insurance at all.

This amendment will permit cases to be filed against an employer 90 days after notifying both the employer and insurer of the complaint and intent to file. A suit can only move forward if the insurance carrier does not attempt to collect what is owed during the 90 day notice period. Plaintiffs who can show that an employer violated the workers' compensation statue are entitled to recover 25% of the full value of that is owed, up to a $25,000 maximum. They are also entitled to an additional $25,000 or 25% of what is owed, whichever is less, in compensatory and liquidated damages, along with attorney's fees and cost.

The balance of funds recovered will go into the state's Workers' Compensation Security Fund for insured workers whose companies did not pay for insurance. This new amendment will not apply to existing workers' compensation insurance policies since it could take up to a year before the first suits are filed since most workers' compensation policies run for a year.

Legislative history

New bill.

Fiscal implications

None.

Effective date

Shall take effect one year after becoming law.