A provision in New York Workers’ Compensation Law can potentially devastate the personal wealth of unsuspecting corporate officers who fail to get insurance. I received a phone call today from an IIABNY member in Brooklyn whose client has received notice from the New York Workers’ Compensation Board that he personally owes $100,000 in penalties because his firm did not carry workers’ compensation insurance for four years. The member wanted to know if the law allows the board to hold someone personally liable.
Unfortunately for this insured, the answer is yes. Section 52 of the WC Law states in subparagraph 1.c.:
Where the employer is a corporation, the president, secretary and treasurer thereof shall be liable for failure to secure the payment of compensation under this section. It shall be an affirmative defense to any action against any officer of a corporation under this section that the officer took reasonable steps to ensure that the corporation secured compensation, that proper internal procedures were in effect to do so, and that proper internal controls existed to monitor compliance with said procedures.
The board’s Web site contains a warning to employers about this. I have no idea why this firm didn’t have WC insurance, but this gentleman’s finances may be ruined because of it. Insurance agents and brokers must impress on clients the importance of complying with the law on securing WC insurance. Much more than the financial health of the company is at stake.