Every employer is required by law to either purchase workers compensation insurance or meet stringent statutory requirements to act as self-insurer. The purpose of such coverage is to provide immediate financial assistance to an employee suffering a job related injury, without the necessity of determining fault. Except for the rare employee who waives workers compensation benefits when hired, those benefits constitute an employee's exclusive remedy against the employer. That means the injured employee who gets workers compensation may not sue its employer in court for tort damages, such as pain and suffering.
The question is what happens to this system when the employer fails to provide the workers compensation coverage required by law. This question has two parts: first, what legal penalty is imposed on the employer; and second, what alternative legal rights are conferred on the employee?
An employer in Massachusetts who fails to afford its employees workers compensation coverage as required by law is subject to both civil and criminal penalties. First, the employer may be immediately ordered to stop all work and assessed a civil penalty of $100 per day for each day coverage was not provided. That same employer may also be debarred from bidding on public projects for three years. In addition, the employer is exposed to additional criminal penalties including fines and imprisonment. In the case of a corporate employer, those penalties are imposed on the president and treasurer.
An injured employee who finds him or herself without workers compensation coverage provided by its employer, may secure comparable benefits from a trust fund established in the State Treasurer's office set up specifically to address that contingency. In addition, if the uninsured employer is a subcontractor, the injured employee would be entitled to benefits under the general contractor's workers compensation coverage. Finally, the injured employee is afforded the right to sue his employer in court for full tort damages, including pain and suffering, without having to prove his injury resulted from the employer's negligence.
By not providing coverage mandated by law, the employer forfeits its right to challenge its own liability for the injury and forfeits its right to limit damages to these provided by the workers compensation statute.
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