Nobody really associates tech startups with frequent on-the-job injuries. Early stage tech companies are usually shipping code and not shipping big heavy things. They usually aren’t factories and the most obvious employee injury hazard is… carpal tunnel.
But every New York startup and every startup with New York employees needs to hold workers’ comp insurance. Not knowing – or forgetting – this key HR checklist item can be financially devastating for early stage companies. New York’s Department of Labor takes a “find and fine” approach to workers’ comp insurance. The department finds companies that don’t have mandatory insurance. And then fines them. Employers can be liable for $2,000 per ten days of non-compliance.
And it gets worse from there. If an employee suffers an on-the-job injury, the employer is liable for the penalty and the medical costs. In other words, when the company doesn’t have insurance, the company has to pay what the insurance otherwise would have covered. An early stage company’s lack of VC financing isn’t an excuse. Nor is a lack of revenue. The state can hold a corporation’s officers personally liable and require officers to pay out of pocket when a corporation fails to bind the insurance.
Your lawyer isn’t the main point person to cover most company HR, payroll and insurance logistics. Usually, I hear about lack of insurance coverage after New York State has sent a client a nastygram. There are mixed results about the degree to which the state will negotiate a fine downward.
But prevention is the best medicine for avoiding the problem in the first place. A professional payroll provider (like Gusto or Zenefits) or a PEO (like Trinet) can help be sure that coverage meets state requirements and stays up-to-date.