Company gets 2nd chance to avoid penalty for failure to maintain policy
Case name: Hill v. Kansas Department of Labor, No. 99,726 (Kan. 04/01/11).
The Kansas Supreme Court held that if an employer violates a state law requiring workers' compensation insurance, a civil penalty does not have to be imposed.
What it means: In Kansas, the Division of Workers' Compensation has the discretion to impose no civil penalty on an employer who fails to maintain workers' compensation insurance.
Summary: The owner of a cab company terminated the employment of three employees due to decreasing profits. He retained a manager and two cab drivers under service agreements that purportedly changed the drivers' status to independent contractors. The company canceled its workers' compensation insurance because the owner believed the drivers were independent contractors. An anonymous caller informed the Division of Workers' Compensation that the company was operating without workers' compensation insurance.
The division alleged the company knowingly and intentionally failed to maintain insurance, in violation of state law. The company subsequently reinstated its insurance coverage for a $3,400 annual premium. An administrative hearing officer imposed a $10,000 penalty. The Kansas Supreme Court held that the division has discretion to not impose a penalty even if the employer violated the law. The court sent the case back to the division to determine whether a civil penalty should be imposed.
The company argued that the hearing officer erroneously considered a civil penalty between $6,800 and $25,000 rather than between zero and $25,000. The court agreed, finding that the word "may" in the law did not require a civil penalty to be mandatory.
The court also said that according to the plain language of the statute, once a determination is made that a civil penalty will be imposed, the penalty is set at twice the annual premium the employer would have paid or $25,000, whichever is greater. The court said that "it may seem illogical" that an employer is subject to either no penalty or a substantial one but that was the legislature's mandate.
Read more at the WorkersComp Forum homepage.
May 12, 2011
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