What Is the Penalty for Not Having Workers Compensation Insurance?
In Virginia, Uninsured Employers Who Do Not Carry Mandatory Workers Comp Insurance Face Civil Fines, Criminal Penalties, Lawsuits to Recover Sums Paid for Benefits by the Uninsured Employer’s Fund (UEF), and Civil Actions for Personal Injuries and Accidental Deaths
Quick Answer: In Virginia, employers who do not have workers compensation insurance coverage when the law requires it face civil fines up to $250 per day (with a cumulative maximum penalty of $50,000), Class 2 misdemeanor criminal charges (though rare), lawsuits seeking recovery of awarded benefits paid by the Commonwealth’s Uninsured Employer’s Fund, and potential strict liability under tort law for the injured employee’s damages, with no caps on how much the court may award.
Penalty Summary for Uninsured Employers in Virginia
| Penalty Type | Consequence |
|---|---|
| Civil Fine (Daily) | Up to $250/day |
| Civil Fine (Maximum) | $50,000 + costs |
| Criminal Charge | Class 2 misdemeanor |
| Potential Jail Time | Up to 6 months |
| Criminal Fine | Up to $1,000 |
| Lawsuit Exposure | Unlimited damages, strict liability in some judicial circuits |
Every state except Texas and South Dakota requires businesses to carry workers compensation insurance once they reach a specific size. In Virginia, that threshold is three employees—full-time or part-time makes no difference.
An employer can either purchase insurance through an insurance company or get approval from the Virginia Workers Compensation Commission to self-insure. That second option, however, only works for employers with substantial financial resources, such as local governments or large companies. Most businesses should use a private company or group self-insurance association to satisfy their obligation to have workers compensation insurance.
Virginia law doesn’t take kindly to employers who ignore their obligation to provide employees with workers compensation insurance coverage. The penalties are substantial. When a business with three or more employees operates without coverage and an injury occurs, it violates Virginia Code Section 65.2-805. And the consequences could go beyond a small fine.
Why Employers End Up Uninsured
Some business owners ignore their insurance obligations to save money. Others make honest mistakes—a policy lapse, or they receive bad advice on who counts as an employee, or something else.
The Virginia Workers Compensation Commission, headquartered in Richmond with regional offices throughout the state, from Roanoke to Fairfax to Virginia Beach, doesn’t particularly care which category an employer falls into once someone gets hurt on the job.
The Penalties for Failing to Have Workers Compensation Insurance
A noncompliant employer faces several categories of penalties for failing to have workers comp insurance coverage for its employees.
Daily Fines That Accumulate Fast
An employer that fails to carry workers compensation insurance when required by the Virginia Workers Compensation Act faces civil penalties of up to $250 for each day it remains uninsured, with a maximum penalty of $50,000, plus costs.
Criminal Penalties
In addition to civil fines, an employer who knowingly and intentionally fails to have workers comp insurance is guilty of a Class 2 misdemeanor under Code Section 65.2-806. Conviction can result in up to six months of jail time and a $1,000 fine.
The Employer May Have to Reimburse the Uninsured Employer’s Fund (UEF)
Chapter 12 of the Virginia Workers Compensation Act establishes the “Uninsured Employer’s Fund,” which pays workers compensation benefits awarded against any uninsured employer.
If you win your claim against an uninsured employer, the UEF pays the awarded benefits. It can even negotiate and pay a workers compensation settlement. In return, the UEF keeps the rights to subrogation and recovery from the employer for benefits and settlement proceeds paid to you.
This means the UEF can sue the uninsured employer to recover the actual cost of your medical care and compensation payments. Then attempt to collect any judgment awarded from the employer’s assets or income.
The Biggest Win for Employees Injured While Working for an Uninsured Employer: Potential Strict Liability in a Personal Injury Lawsuit
The penalties described above hurt the employer, but they don’t really help you, the injured worker.
But this next penalty does.
Virginia Code Section 65.2-805 gives injured employees a choice that workers at insured companies don’t have. Instead of having workers compensation as your exclusive remedy for an occupational injury or disease, you can sue your employer under tort law to recover damages for personal injury or wrongful death, including compensation for pain and suffering that is not available in workers comp.
Even better, some Virginia courts will hold the employer strictly liable for your injury, meaning the sole question is the amount of damages you should receive. In contrast, other courts (there is a split among judicial circuits) may require you to prove negligence. Still, they will prevent the employer from raising the defenses of contributory negligence, fellow-servant doctrine, and assumption of the risk of injury.
This option allows you to receive a much larger award of compensation than typically allowed because you can recover additional types of damages without the 500-week cap.
However, consult with an experienced workers compensation attorney before you choose this option automatically. A large verdict or judgment only benefits you if you can actually collect it. You should evaluate the likelihood of recovering such an award from your specific employer.
Why Attorneys Actually Prefer Insured Employers
I would much rather deal with an insured employer and a workers compensation insurance company like Travelers or The Hartford or third-party claims administrator (TPA), such as Sedgwick or Gallagher Bassett, than an uninsured employer.
And many other claimants’ attorneys agree, even though personal injury lawsuits against uninsured employers can potentially yield more money.
Here’s why.
First, although exceptions exist, many uninsured employers are small companies that have not purchased workers compensation insurance due to financial constraints. And businesses that do not make much money are more likely to go bankrupt if you secure a significant judgment against them, leaving you with a big award on paper but not much else. Therefore, while not as impressive on paper, receiving workers comp payments and medical benefits is more likely to provide actual help to you and your family.
Second, I have yet to meet an injured employee who wants to spend the next decade (or longer) dealing with the workers comp system and fighting claim adjusters and insurance defense attorneys over benefits payments or authorization of medical treatment. They would much rather negotiate a fair workers compensation settlement, regain control over their finances and healthcare, and move on to the next stages of life.
Negotiating a reasonable settlement is much more likely with an insurance company than with the UEF. In my experience, the UEF, as a state fund, rarely offers settlements in the six-figure range. So, if you have a catastrophic injury that requires surgery like a spinal fusion or total knee replacement, you are unlikely to receive a settlement offer from the UEF that accounts for the nature and extent of your injuries and disability. Smaller settlements, however, are more likely.
Third, while it is possible to negotiate a settlement with an uninsured employer directly, many of these employers have limited experience with occupational injury claims and often hold unreasonable expectations about the amount they should pay.
For Injured Workers: Understand Your Rights When Your Employer Doesn’t Carry Workers Compensation Insurance
One injury is enough.
Don’t let your employer’s failure to satisfy its obligations harm you a second time.
Contact my law firm at (804) 251-1620 to discuss your options when you have a workers compensation claim involving an uninsured employer. There’s no obvious correct answer. What you should do depends on he specific facts of your case. We’ll help you with that choice.
Key Takeaways:
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- Virginia requires businesses with three or more employees to carry workers comp insurance
- Civil penalties reach $250/day, up to $50,000 maximum
- Criminal penalties include up to 6 months jail and $1,000 fine
- Injured workers can pursue a claim through the workers compensation system or sue their employer in civil court for unlimited damages including pain and suffering.
- If the employe chooses to file a workers comp claim and wins, the Uninsured Employer’s Fund pays benefits, then recovers costs from the employer
- You have options—get legal advice before choosing your path forward
