Don’t Toy With Worker’s Compensation Insurance

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Workers compensation insurance ain’t cheap. So companies may sometimes be tempted to fudge a little. Like, if one of your IT

When Norman bought that bargain basement worker's comp policy he was thinking about Bill, the sloppy fruitarian...

When Norman bought that bargain basement worker’s comp policy he wasn’t thinking about Bill, the sloppy Fruitarian…

guys normally doesn’t do a lot of heavy lifting but when you need stuff carried out of the office he’s your go-to guy, you might be tempted to classify the employee as someone who has a non-physical job. After all, that’s a lot cheaper. Unless he gets hurt, or you get sued. Then your little savings on worker’s comp can cost a lot. A whole lot.

Worker’s comp premiums are based on what kind of job the employee has, whether you’ve had injuries reported before, and other risk factors in your company.  A recent example of someone toying with the lines of worker’s comp was reported in the HR magazine produced by the Society for Human Resources Management (SHRM). A married couple owned a landscaping company and a tree trimming company. Obviously people who climb around in trees with chain saws have a more dangerous job than people who dig holes, even if they have to carry very heavy plants or equipment. But the owners didn’t want to pay the extra for the tree trimmers so they just classified all their employees as landscapers.  Then they were audited. The long and short of it was, they had to plead guilty to 19 misdemeanor counts of misrepresenting facts, five felony counts of misrepresenting facts,  and tax evasion. They were given 10 years probation and a $3.4 million fine.  I don’t know how much it would have set them back to properly classify employees but I’m guessing it would have been cheaper.

In this case, it was a state run worker’s comp program. But don’t think that a private firm, looking out for its financial interests, won’t catch up with you.

In Texas, you don’t actually have to have worker’s comp. So as long as nobody gets hurt, you’re good. On the other hand, if someone does get hurt, you ARE required to pay for all the things that would have been covered by the insurance.  And you may think that’s an easy bet. After all, most of your employees have desk jobs. What could go wrong? Unfortunately, plenty.  According to the Centers for Disease Control, office workers are 2.5 times more likely to be injured in a fall than non-office workers. They can trip over a bump in the carpet, a cord, a box of papers left in the wrong place, a drawer left open, hit their heads and whammo.

There are some risks in life worth taking. Extreme sports—if you’re into that. Or working at a startup. Some people eat Fugu. But playing around with worker’s compensation insurance really isn’t one of them.

We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business, with offices in Austin, San Antonio, Dallas and Houston. Contact me at Caroline@valentinehr.com or call (512) 420-8267.