Virginia Significantly Raises Worker Misclassification Fines


Worker misclassification remains a number one target area for both state and federal review.  On July 1, 2014, the  Virginia Workers Compensation Act (the “VWCA”) significantly increased the civil penalties that the state can impose on a Virginia business owner who has failed to insure a worker who should have been insured.   

The civil penalty is now up to $250 per day for each day of noncompliance, subject to a maximum penalty of $50,000, plus collection costs.”  The VWCA requires every business owner with more than two employees (a part-time worker is counted as one employee) to have coverage for such worker. 

Business owners may forget to count subcontractors/independent contractors into their calculation. According to the Virginia Workers’ Compensation Commission, “If a business hires subcontractors to perform the same trade, business or occupation, or to fulfill a contract of the business, the subcontractor’s employees are included in determining the total number of employees …A business or contractor that hires subcontractors to assist in their work or fulfill a contract must count the subcontractor’s employees as well as their own when considering if they have more than two employees, if yes, the business /contractor is required to carry workers’  compensation coverage. This is true even if all subcontractors have their own coverage.”

The VWCA’s purpose is to provide financial protections to a worker who is injured in a workplace accident; therefore, insurance coverage for a worker is required. If an business owner hires contractors, the business owner should have every contractor show proof of coverage before commencing work as an independent contractor.   The VWCC provides a form (Certifcication of Worker’s Compensation Insurace Coverage Form 61-a) to establish proof of coverage. If the business owner does not obtain this evidence there will be little defense to the imposition of a civil penalty should it be determined that the worker/contractor is not independent but, in fact, an employee of the business owner. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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