Even Uninsured Employers Need Love

When you look to categorize employers in Workers’ Compensation most fall into one of two categories: insured and self -insured. They are the “good” employers since they took the steps to take care of their injured workers. Yet there is another category consisting of the despised and reviled employers who have no coverage of any kind in place: uninsured employers. The common perception is that they are this way (uninsured) out of an intention to save a buck. In our California legal system, these uninsured employers are formally referred to as “illegally uninsured” and they are statutory criminals. They are suspect in their testimony (as recounted by some in our judiciary) because, after all, they are trying to protect themselves from their own misfeasance by not procuring the mandatory insurance coverage. Their employees do not have the constrictions or benefits of a medical provider network, and utilization review does not exist for them. Injured workers are free to seek whomsoever they wish to treat them and there are no formal checks on the amount or nature of the treatment, contrary to the way it exists with insured employers and utilization review of treatment.

These employers are accused of defrauding the system, making a level playing field impossible for the good employers, who obtain insurance at their own expense. Their lack of appropriate action has resulted in burdening the state with the need for another bureaucratic entity to handle the damage they create (our Uninsured Employers Benefits Trust Fund).

In return, they are exposed to sweeps by assistant district attorneys and investigators and subject to big-time fines ($10,000 – $50,000) of a criminal nature, misdemeanor criminal conviction, civil fines from the Labor Commissioner ($1500 per uncovered employee), 10% penalties in the WCAB case, potential attorney fee payment in the compensation case, dual exposure to civil and WCAB litigation, (unlike insured employers), loss of classic defenses in civil suits (contributory negligence, assumption of the risk and fellow servant defenses). Billboards encouraging the reporting of their uninsured status have dotted our landscape in San Diego County and news of their arrest and possible imprisonment is circulated throughout our state as cautionary tales for the criminal minded. These are just a few of the parade of horrors visited upon the uninsured employer.

But in reality who really are the vast majority of these employers? Are they all schemers and criminally minded? Are they intentionally out to beat the system? Are these the ones we should even care about?

Based upon our defense of many hundreds of these uninsured employers over the years we have found that the vast majority of them are just misinformed or uninformed innocents who lacked a clue with regard to the requirement that they carry this kind of coverage. Many believed that the liability insurance their broker sold them affords all the protection they needed. In the melting pot of cultures that California is, many first time employers never knew they had to have this kind of insurance in business, as opposed to the way it was in their foreign homelands.

Alternatively many believe that the person performing work for them is either an independent contractor because their accountant described them in that fashion, or casual day laborers who are not really employees, hence no need for this kind of insurance. Others are certain that hiring relatives or dear, close friends does not make them employees who might sue, since relatives and friends would never ever do that, right?

Others have encountered genuine financial downturns which could have threatened the very life of the business unless judicious emergency economies were embraced. Those economies involved non- payment of premium, but just until things got better.

No matter the excuse, the system is blind to the havoc, pain, and loss of dreams experienced by the uninsured employer who, in the vast majority of cases, is a very small business or a professional person struggling to get by. When the injury hits their newly defined “employee”, there goes the college fund for their child or children; there goes the savings account; there goes the nest egg and sadly in the end there goes the business, the nights of sleep, and the hopes and dreams of making a go of it.

In California, the injured worker always gets paid in the end, as do the worker’s providers, if the claim is legitimate. Granted, the payment is not until the very end of the case and not timely enough to aid the worker in the early stages of his plight. In the end, however, there is a payment for all of those benefits just as if there were insurance in place, and thus the worker is not completely abandoned.

Not so for the uninsured employer, whose options for relief come down to years of repaying the state, flight, or bankruptcy. With the total cost of a typical workers’ compensation case (with all costs from start to finish years later, combined with penalties) hovering above $80,000 is it any wonder that the uninsured business would be finished and the dreams destroyed?

Traditionally all of our attention has been focused upon the unfortunately injured worker and the travails that he/she must endure by virtue of their employer not taking the proper care of them by securing workers’ compensation insurance. Taking care of the injured worker is the purpose of the entire workers’ compensation system, as well as it should be.

But let us take a moment to pause and think of that other participant, the uninsured employer, whose tragedy is often, if not always, dismissed with the admonishments that he only has himself to blame, that it is his own fault, and ignorance of the law is no excuse and, often unkindly, he gets what he deserves.

This should not be taken as an apology. This should not be taken as offering an acceptable excuse for being uninsured. This should be taken as an opening to an awareness that we are not always talking about villains and scoundrels. We are talking about the other victim. The reality is that there are two victims: the injured employee and the uninsured employer, and they each have their own kind of hurt, yet the uninsured employer remains despised by most in our system. That is unfortunate and ill-willed. We are not talking about those out to intentionally game the system but rather the hapless and or ill-informed. Their story is filled with grief too, both emotionally and financially. They play their part in our system and it is a sad one.

Even uninsured employers need love.