I am revisiting this issue because of a number of recent consultations and phone calls I have received from trucking companies illegally operating without Worker’s Compensation insurance. Therefore, let’s discuss w hat are the consequences of a misclassified or uninsured Truck Driver getting hurt or killed on the job?
A recent conversation:
I recently received a phone call that bears repeating:
Caller: “Do you deal with Worker’s Compensation”
Me: “I know a fair amount about Worker’s Compensation, can you be more specific?”
Caller: “I have a Worker’s Compensation problem, can you help me?”
Me: “Well, what is the problem?”
Caller: “I had a driver who was a 1099 Contractor, and his family is asking for my workers compensation information.”
Me: “Was the driver hurt?”
Caller: “He was killed.”
Me: “He was killed? Was he driving your truck?”
Me: “OK, so was the truck registered to your company and was he driving under your authority?
Caller: “Yes,Yes, but he wanted to be treated as an independent contractor.”
At this point in time I was thinking “You’re probably screwed”. That is a crass way of putting things, but if a misclassified or uninsured Driver gets hurt or killed while driving for your company, the consequences for the company, and the owners of the company, are devastating. And this is true whether you are dealing with a misclassified driver or a properly classified employee driver, either of which are not covered by workers’ compensation insurance. Because many companies continue to illegally operate operate without Workers’ Compensation insurance, I am revisiting the disastrous consequences that can occur when a Misclassified Independent Contractor or Uninsured truck driver sues a trucking company for Worker’s Compensation Benefits.
Failing to have workers’ compensation coverage is a criminal offense.
If the Division of Labor Standards Enforcement (DLSE) determines that an employer is operating without workers’ compensation coverage, a stop order will be issued. This order prohibits the use of employee labor until coverage is obtained, and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, a fine of up to $10,000, or both. The DLSE will also assess a penalty of $1,000 per employee who is on the payroll at the time the stop order is issued and served, up to $100,000 (California Labor Code Section 3722(a)). If an employee gets hurt or sick because of work and the employer is not insured, that employer is responsible for paying all bills related to the injury or illness. Also, if an employer is illegally uninsured and an employee gets sick or hurt because of work, that employee can file a civil action against the employer in addition to filing a workers’ compensation claim.
Additionally, if an injured worker files a Workers’ Compensation claim that goes before the Workers’ Compensation Appeals Board and a judge finds that the employer had not secured insurance as required by law, when the dispute is resolved the uninsured employer may be assessed a penalty of $10,000 per employee who was on the payroll at the time of injury, if the worker’s case was found to be compensable, or $2,000 per employee who was on the payroll at the time of injury, if the worker’s case was noncompensable, up to a maximum of $100,000 (Labor Code Section 3722(b))
The risks to an uninsured trucking company are many, and can threaten the continued existence and viability of the trucking company. These risks include:
Possibility of business closure
Large fines imposed by the California Labor Commissioner ($2,000-$10,000 per Employee)
Presumption of negligence
Exposure to civil suits by injured workers
Criminal conviction and personal fines
Imposition of a 10% surcharge in addition to the disability claim, plus attorney’s fees for the worker
Personal Liability of the Owners of the Company for injuries or death of a driver.
The California Labor Code has a specific provision which allows for holding the owners of a company personally liable for the death or injuries of an injured worker if they were operating without proper Worker’s Compensation insurance in place.
California Workers’ Compensation: Death Benefits
The amount of death benefits due is determined by the number of dependents eligible to collect payment. For injuries occurring on or after January 1, 2006, the following amounts are paid out: $250,000 for one total dependent, $290,000 for two total dependents, and $320,000 for three or more total dependents. Certain members of a worker’s family are automatically considered to be total dependents under the law. They include: children under the age of 18; children of any age who are physically or mentally incapacitated and unable to earn a living; and a spouse who earned $30,000 or less in the 12 months before the worker’s death.The uninsured company would also be responsible for burial expenses up to $10,000.
However, this is only the beginning for the Uninsured Employer: The family would be able to bring a Wrongful Death civil lawsuit in Superior Court against the company and its owners.
Other penalties and fines the Trucking Company can get hit with:
Sections 226.8 and 2753 of the California Labor Code authorize California’s Labor and Workforce Development Agency to assess civil penalties of not less than $5,000 and not more than $15,000 for each violation in addition to those civil penalties already permitted by law. The civil penalties increase to $10,000 to $25,000 for each violation if the Agency determines that the employer has engaged in a pattern, or practice, of willful misclassification of its employees as independent contractors. The worker can file a complaint with the Labor Commissioner and the Labor Commissioner can assess the above-mentioned civil penalties against the employer if the Labor Commissioner determines that the employer has in fact misclassified the employee.
The misclassified employee can seek up to three years worth of unpaid wages (including overtime and meal and rest break violations), unreimbursed businesses expenses, and penalties for violating various California Labor Code provisions (Labor Code §203, §210, §226.3, §2802 and §3710.1; California Unemployment Insurance Code §§1112, 1113.2, and 2118). California business owners may also face exposure to tort liability for injuries suffered by employees when workers compensation insurance was not secured (Cal. Labor Code §3706), for unfair business practices (Business and Professions Code §17200), and even potential criminal liability under Labor Code §3700.5.
Pursuant to California Labor Code § 226.3, a misclassified worker may claim that the business violated the statutory obligation to provide itemized wage statements each pay period. If the Court determines the worker was in fact an employee, the court may award additional civil penalties in the amount of $250 per employee for the first citation and $1,000 per employee for each subsequent citation. It should also be noted that under California Labor Code §226.6, a knowing and intentional violation of these requirements is a misdemeanor.
Pursuant to California Unemployment Insurance Code §§1112 and 1113.2, if a court determines that a worker was misclassified, the employer will be assessed amounts due for state income tax withholding, unemployment insurance contributions, and disability insurance contributions, unless the employer can show the income was reported and all taxes due were paid by the employee. Employers who fail to pay for unemployment insurance benefits and/or state disability insurance benefits are not only required to pay the unwithheld amounts, but may also be assessed a 10% penalty and interest on the unpaid contributions.
No Relief in Bankruptcy Court: This type of liability is non-dischargeable in bankruptcy.
The owners (including directors, officers, and shareholders) of a company where a misclassified Driver was killed will probably not be able to avoid a worker’s Compensation death award or wrongful death judgment in bankruptcy court. And for that matter, many of the other consequences of operating without workers’ compensation insurance are likely non-dischargeable in bankruptcy as well. Take heed : The liability for the death or injuries of a misclassified or uninsured driver could follow the owners of the company to their grave.