Workers’ Compensation Insurance Guide
New York State
New York workers’ comp insurance has a storied past and a provocative present. New York was the first state to adopt workers’ compensation insurance. In fact, the origins of the movement to protect and compensate workers for on-the-job injuries and illnesses can be traced back to the infamous Triangle Shirtwaist Company fire of 1911, which killed 146 workers in New York City.
New York workers’ comp insurance is known for being expensive and difficult to manage, particularly for construction contractors operating in New York City. Small businesses also have a hard time navigating New York’s constantly changing labor laws, and most people are surprised to learn that small businesses makeup 98% of New York businesses.
Many of these contractors and small businesses end up in the state fund—the New York State Insurance Fund (NYSIF), the largest writer of workers’ comp in the state and the sixth largest in the nation, according to the National Association of Insurance Commissioners. While the NYSIF can be competitive on rate for certain classes of business, employers who purchase workers’ comp from them can find themselves with little flexibility and support when it comes to safety management and keeping workers’ comp costs predictable and contained.
Who needs workers’ compensation insurance in New York State?
Virtually all employers in New York State must provide workers’ compensation coverage for their employees, according to the New York State Workers’ Compensation Board. The state considers an employer to be any person (including family members) who performs under the supervision, direction, and control of an employer either on or off their premises. The definition of who is considered an employee is so explicit that the state breaks it down for for-profit businesses, nonprofit entities, and independent contractors.
For-profit businesses (including sole proprietors, partnerships, LLCs, LLPs, and most corporations) with any of the following types of employees are required to provide coverage:
- Part-time or full-time
- Temporary or seasonal
- Casual/day labor
- Unpaid—including volunteers and family members
Exceptions: (1) Partnerships, LLCs, and LLPs that do not have employees (members and partners are also excluded); (2) One or two-person owned corporations when those individuals own all stock and hold all offices and there are no employees as defined above.
All nonprofit entities compensating individuals for their services are required to provide coverage with the following exceptions:
- Clergy and members of religious orders performing religious duties
- Members of supervised amateur athletic activities operated on a nonprofit basis
- People engaged in a teaching capacity in or for a nonprofit institution designated under the IRS tax code as a religious, charitable, or educational organization
- Persons receiving charitable aid from a religious or charitable institution who perform work in return for such aid and who are not under any express contract of hire, and certain persons receiving rehabilitation services in a sheltered workshop
- People engaged in a non-manual capacity for a nonprofit institution designated under the IRS tax code as a religious, charitable, or educational organization
- Compensated executive officers of a not-for-profit corporation or unincorporated association are exempt, if the institution is designated under the IRS tax code
Independent contractors are required to provide coverage as identified under the Construction Industry Fair Play Act
New York State’s Construction Industry Fair Play Act (the Act) took effect on October 26, 2010. For the purposes of workers’ compensation, disability benefits, and Paid Family Leave, the Act applies to all accidents on or after that date. Any worker injured while performing services for a contractor is presumed to be an employee of the contractor. In summary, a person working for an employer in the construction industry is only an independent contractor if they meet a two-part test:
- An individual is an independent contractor if an employer can prove ALL three of the following criteria:
- The individual is free from control and direction in performing their job.
- The individual is performing services outside the usual course of business for the employer.
- The individual is engaged in an independently established trade, occupation or business that is similar to the service they perform.
- A sole proprietor, partnership, corporation, or other entity is an entity separate from the contractor, only if it meets ALL twelve of the following criteria:
- Perform the service free from direction or control, subject only to the right of the contractor to specify the desired result
- Is not subject to cancellation when its work with the contractor ends
- Has a substantial investment of capital in the entity beyond ordinary tools and equipment and a personal vehicle
- Owns the capital goods, gains the profits, and bears the losses of the entity
- Makes its services available to the general public or business community on a regular basis
- Includes the services provided on a federal income tax schedule as an independent business
- Perform the services under the entity’s name
- When the services being provided require a license or permit, the business entity obtains and pays for the license or permit in the business entity’s name
- Furnishes the tools and equipment necessary to provide the service
- Hire its own employees without contractor approval, pays the employees without reimbursement from the contractor and reports the employees’ income to the Internal Revenue Service
- Has the right to perform similar services for others on whatever basis and whenever it chooses
- Does not represent the entity or the employees of the entity as its own employees to its customers
The trucking industry also has its own criteria. For all other industries, an individual is considered an independent contractor if they:
- Perform the service free from direction or control, subject only to the right of the contractor to specify the desired result
- Obtained their own Federal Employer Identification Number (FEIN) or have filed business or self-employment income tax returns based on work or service performed in the previous calendar year
- Maintain a separate business establishment
- Perform work different from that of the hiring business and works for other businesses
- Are responsible for performing satisfactorily under a specific contract and is in a position to succeed or fail if the business’ expenses exceed its income
- Obtain a liability insurance policy (and if appropriate, workers’ compensation and disability benefits insurance policies) under its own legal business name and federal employer identification number
- Have recurring business liabilities and obligations
- Advertise their own business
- Provide all equipment and materials necessary to fulfill the contract
- Work under their own operating permit, contract, or authority
How workers’ compensation works in New York State
The New York State Workers’ Compensation Board administers the state’s workers’ compensation laws. Other entities managing workers’ comp in New York include:
- The New York State Department of Labor, which, among other things, computes the state’s average weekly wage for the purposes of computing maximum weekly workers’ comp benefits.
- The Compensation Insurance Rating Board, which collects data and develops rates and experience modification factors.
- The New York State Department of Financial Services, which oversees the insurance companies doing business in the state.
- The private insurance carriers authorized to provide workers’ comp in the state.
- The New York State Insurance Fund (NYSIF) which must provide insurance to any employer seeking coverage.
Workers’ compensation benefits in New York
Workers injured on the job and eligible for workers’ compensation in New York are entitled to the following benefits:
- Medical care, including medical, dental, surgical, optometry, medically necessary drugs, assistive devices. Employees must use a health care provider from the Board’s medical provider list unless the employer participates in a Preferred Provider Organization (PPO) program.
- Lost wage benefits, if the injury or illness prevents the employee from work for more than seven days or the injury or illness caused the employee’s pay to be reduced due to working fewer hours or performing other light-duty work.
- Survivor benefits if the injured worker dies from a compensable injury or illness. Weekly cash benefits are two-thirds the deceased worker’s average weekly wage for the 52 weeks prior to the accident.
Employers must notify the Workers’ Compensation Board of all injuries other than minor injuries (defined as two or fewer treatments by a person rendering first aid, and lost time less than one day beyond the end of the working shift) within 10 days. Failure to file within 10 days of the accident is a misdemeanor and can lead to a penalty of up to $2,500.
The treating healthcare provider must be authorized by the Board except in emergency. Employers are not allowed to direct employees to a particular healthcare provider unless the employer is participating in the PPO or Alternative Dispute Resolution program.
Penalties for noncompliance
Penalties for noncompliance for workers’ comp coverage in New York can be as high as $2,000 for every 10-day period without coverage. So by the time an employer receives a first penalty notice, the penalty may be more than $12,000.
Employers can also face criminal liability and additional fines from $1,000 to $5,000. The state workers’ compensation board can issue a stop-work order and shut your business down or stop the employer from bidding on contracts for public workers projects.
Employers have 30 days from the date of the initial penalty notice to request a review and explain why there was a lapse in coverage in an attempt to reduce the noncompliance penalty.
Where employers can buy workers’ compensation insurance in New York
Employers in New York can purchase workers’ compensation insurance from one of the 200-plus private insurance companies authorized to sell it by the state. Self-insurance is an option if approved by the state.
Since all employers in the state are required to carry workers’ comp, the New York State Insurance Fund (NYSIF) is available for any employer who is unable to obtain coverage from a private insurer, or who chooses to purchase from NYSIF. NYSIF must provide insurance to any employer seeking coverage, regardless of class code, size, or loss history. Just recently, New York’s governor signed a bill into law that says the NYSIF can no longer deny coverage if the employer owes payment from a previous bill or account.
How workers’ compensation premium is calculated in New York
New York typically has among the highest workers’ compensation rates in the country—second only to its neighboring state of New Jersey—averaging $2.00 – $2.49 per $100 in payroll, according to one 2020 study.
New York has its own independent rating bureau, the Compensation Insurance Rating Board (NYCIRB), an independent, non-governmental rating authority that assigns classification codes. In late 2021, NYCIRB announced that New York was withdrawing from the NCCI interstate rating plan.
New York OSHA and safety statistics
The New York Public Employee Safety and Health (PESH) is New York’s OSHA-approved State Plan and covers state and local government workers only. All other employers follow federal OSHA standards. New York PESH has generally adopted all OSHA standards applicable to state and local government employment.
New York requires every employer in both the public and private sectors that has a high rate of workplace injuries and illnesses to develop and implement a written safety and loss prevention program. New York State actually has a nonfatal occupational injury and illness rate statistically less than the national rate in 2020, according to BLS data.
However, both New York State and New York City have a fatality rate above the national average for construction site deaths. In 2020, construction deaths accounted for 22 percent of all worker deaths in New York City and 24 percent of all worker deaths in New York state, according to BLS. The national average is 21 percent.
Why Workers’ Compensation is “Difficult” in New York
New York’s large population, high cost of living and medical costs contribute to the high cost of workers’ compensation insurance for employers in the state, and in New York City in particular. A disproportionate number of employers end up in the NYSIF—especially construction contractors. Many don’t need to be there if their brokers ensure they’re properly classified and have attempted to place them with private insurers who understand the difficulties of operating in New York and the need for top-notch safety management.
A tough regulatory environment
New York has a complex definition of who is considered an employee and other laws governing workers’ compensation coverage. For example, a proposed law—the Justice for Injured Workers Act—would increase compensation for milder injuries by changing the definition of temporary total disability and encourage employers to offer light-duty work rather than terminating workers unable to perform their full work duties.
New York City construction work and the Department of Buildings (DOB)
New York is a particularly high-cost state for construction contractors workers’ compensation insurance. Fines are high for construction safety violations, with the average fine amount of $44,779 in 2020 up 39% over 2019.
The New York City Department of Buildings (NY DOB) has specific regulations regarding safety on construction and demolition job sites within the city. For employees performing construction work in New York City on a job site that requires a Site Safety Plan, the employees are subject to Local Law 196 and must undergo the required training for a Limited Site Safety Training (SST) card or an OSHA 30 card for these projects. Training must be renewed every five years.
Pitfalls for out-of-state employers
New York has strict criteria for when an employee or subcontractor is considered “working” in the state. Employers outside New York State must cover employees and subcontractors working in the state with a workers’ comp policy showing New York in item 3A of the policy information page.
Unlike some states, each policy’s Other States Coverage (Item 3C) is not acceptable for temporary or incidental employment in New York State. If an employee is working in the state even for one day, he or she must have a New York workers’ compensation policy.
Tips for lower cost, quality workers’ compensation in New York
With its large economy—third in the nation in terms of its share of U.S. real gross domestic product contribution—New York is a state with a large and diverse set of employers needing workers’ compensation coverage. While 12 other states are ranked higher in average workers’ comp costs, costs are still at a level where employers and their brokers should be looking for ways to contain costs.
Know the pros and cons of the New York State Insurance Fund (NYSIF)
The New York State Insurance Fund (NYSIF) is currently the largest workers’ compensation insurer operating in the state. The fund is known for being especially tough on construction contractors. While NYSIF serves an important function for stabilizing the market and making workers’ compensation available to employers in the state, brokers and employers should carefully compare not just rates, but also the safety and compliance support, rate transparency, and flexibility that NYSIF may not offer.
Use safety-driven pricing for cheaper workers’ compensation premiums
The Ex Mod is where the opportunity to reduce workers’ compensation premiums becomes possible. Foresight uses technology to help you track and analyze loss data to improve your safety program, reduce incidents, and, ultimately, qualify for or improve your Ex Mod.
Use technology to manage safety compliance and prevent injuries
Safety technology makes managing workers’ compensation in New York faster, easier, and more accurate—especially when it’s available on a mobile device and easy for employees to engage with. When technology can track incidents and near misses, capture safety meetings and inspection checklists, and experts can help interpret the data and customize risk management, businesses can minimize the costs associated with claims, lost productivity, OSHA violations, and higher Ex Mods.
Respond to claims quickly
Keeping claim costs down in New York requires immediate reporting and a fast, compassionate response to the injured worker. A digital first notice of loss helps with OSHA compliance, and integrated telemedicine services promote a faster recovery for the injured person and better communication throughout the process, ultimately leading to a faster, less costly resolution.