PA 07-89—sSB 931

Labor and Public Employees Committee

Judiciary Committee

AN ACT CONCERNING PENALTIES FOR CONCEALING EMPLOYMENT OR OTHER INFORMATION RELATED TO WORKERS' COMPENSATION PREMIUMS

SUMMARY: This act authorizes the labor commissioner to issue a stop-work order to an employer who:

1. fails to obtain insurance or provide satisfactory proof of self-insurance for the employer's workers' compensation liability or

2. intends to injure, defraud, or deceive the employer's workers' compensation insurer by knowingly (a) misrepresenting an employee as an independent contractor (and thus not required to be covered by workers' compensation insurance) or (b) providing false, incomplete, or misleading information to the insurance company on the number of its employees in order to pay a lower premium.

By law, an employer who misrepresents the number of employees or provides misleading information is subject to (1) a class D felony (see Table on Penalties) and (2) a civil penalty from the Labor Department of $300 for each violation. The act subjects an employer who fails to obtain insurance or self-insurance to these penalties. The law also subjects an employer who knowingly and willfully fails to obtain insurance or self-insurance to the penalties for a class D felony and civil penalties (see BACKGROUND for other penalties for these violations).

The act includes procedures for issuing and terminating stop-work orders, imposes penalties for violating stop-work orders, and requires the labor commissioner to adopt regulations to implement the act's stop-work order provisions.

EFFECTIVE DATE: October 1, 2007

INVESTIGATIONS AND STOP-WORK ORDERS

Investigations

The law authorizes the labor commissioner to investigate complaints that an employer misrepresented an employee as an independent contractor or provided misleading information to the insurance company on the number of its employees in order to pay a lower premium. The law allows the commissioner to subpoena witnesses and records and fine an employer or any officer or agent who hinders an investigation. Each day of a violation is a separate offense. The act increases the fine from between $25 and $100 to between $100 and $250.

The act applies these provisions to investigations of an employer's failure to obtain workers' compensation insurance or provide satisfactory proof of self-insurance.

Stop-Work Orders

The act requires the commissioner to issue a stop-work order within 72 hours after an investigation determines that the employer committed one of these violations. The stop-work order must require stopping all business operations but only for the specific place of business or employment for which the violation exists. The stop-work order is effective when served on the employer or at the place of business or employment. It can be served at a place of business or employment by posting a copy conspicuously at the location.

The act requires the order to remain in effect until the commissioner orders it released on finding that the employer has complied with the workers' compensation requirement or after a hearing requested by the employer. The act allows the employer to request a hearing in writing within 10 days after the order is issued. The hearing is conducted according to the Uniform Administrative Procedures Act.

The act provides that the stop-work order and any penalties imposed under these provisions against a corporation, partnership, or sole proprietorship are effective against any successor entity that (1) is engaged in the same or an equivalent trade or activity and (2) has at least one of the same principals or officers.

Under the act, an employer who violates a stop-work order is liable to the Labor Department for a civil penalty of $1,000 for each day of the violation.

BACKGROUND

Other Provisions on Investigations and Penalties for Violating Workers' Compensation Insurance and Self-Insurance Requirements

The law requires the state treasurer's investigations unit to investigate an employer for not complying with the insurance or self-insurance requirements at the request of the Second Injury Fund's custodian, the Workers' Compensation Commission, or a workers' compensation commissioner. The investigator issues a citation to require an employer in violation to meet the requirements and provide notice of a hearing and possible penalties. The commissioner conducts a hearing and if the employer is not in compliance, assesses a civil penalty. The commissioner assesses an additional penalty for each day the employer continues in non-compliance. Failure to pay within 90 days can result in a civil action to double the penalty.

An employer who knowingly and willfully fails to comply with the insurance and self-insurance requirements commits a class D felony. This applies to an owner of a sole proprietorship, a partner in a partnership, a principal in a limited liability company, or a corporate officer (CGS 31-288(c) to (f)).

OLR Tracking: CR: SS: JL: TS