Workers’ compensation is a system of no-fault insurance. Workers’ compensation insurance provides wage replacement and medical benefits to employees for work-related injuries and diseases.
The Tennessee Workers’ Compensation Law (TWCL) determines the penalties employers face if they fail to comply with state requirements. The Division of Workers’ Compensation (Division), part of the Tennessee Department of Labor and Workforce Development, enforces compliance with the TWCL throughout the state.
Failure to Maintain WORKERS’ COMPENSATION coverage
Employers that fail to maintain adequate workers’ compensation coverage (through an insurance provider or self-insurance) may be subject to several fines. The first potential fine is an amount equal to 1.5 times the average yearly workers’ compensation premium. This may be assessed for each year of noncompliance. The second potential fine is an amount equal to the employers’ average yearly workers’ compensation premium.
An employer may avoid one or both of these fines by providing, at specified times:
- Proof of coverage;
- Proof of qualification as a self-insurer; or
- Proof of exemption from the TWCL.
In addition, employers that do not file written evidence that they have workers’ compensation coverage within 30 days after they procure or renew a suitable insurance policy are subject to penalties of $100 for every 15 days past the filing deadline. The same penalty applies when an employer cancels any workers’ compensation policy and fails to immediately notify the Division of the cancellation. Self-insured employers are exempt from these specific requirements and fines, but they are subject to penalties of $100 per day if they fail to comply with filing requirements for self-insured certification.
Employers who fail to maintain coverage may also see an increase in the cost of any work-related injury. This is because inadequate coverage allows an injured employee to sue the employer for:
- All compensation payable under the TWCL; or
- All damages as if the TWCL had not been enacted. Employers that are sued for negligence because of inadequate coverage may not use employee negligence, co-employee negligence or the injured employee’s assumption of risk as a defense.
Finally, the Division may prohibit an employer from operating its business in any way until it complies with coverage requirements.
REQUIRING EMPLOYEES TO FUND THEIR COVERAGE
The TWCL prohibits employers from requiring any employee to pay any portion of the employer’s workers’ compensation insurance premium. Similarly, employers cannot deduct any portion of their insurance premiums from their employees’ pay.
Employers that require employees to contribute to their workers’ compensation premiums commit a Class C misdemeanor punishable by 30 days in jail, a fine of up to $50 or both. These employers may also be subject to an additional civil penalty that can be as high as the amount their employees paid for the workers’ compensation premiums.
FAILURE TO PROVIDE REQUIRED MEDICAL PANEL
The TWCL requires employers to provide an injured employee with a list (also referred to as a panel) of medical treatment providers who can provide treatment for the work-related injury or illness. Employers must provide this list within five business days of receiving notice of a work-related injury.
Employers that do not provide the list within the established time may be subject to a penalty of up to $5,000. The same penalty applies to employers that fail to meet specific statutory requirements when providing medical panels.
FAILURE TO PAY MEDICAL EXPENSES
An employer that fails to provide medical benefits to a qualifying employee may be subject to a $500 penalty. An additional $500 penalty may apply to an employer that causes medical expenses to be paid under other insurance plans (such as health policies) despite having knowledge that such expenses should have been paid under the TWCL.
Finally, employers that fail to make a medical payment within 60 days, as required by settlement, judgment or decree, may be subject to an additional penalty equal to 25% of any unpaid medical expenses.
FAILURE TO TIMELY PAY DISABILITY BENEFITS
Employers are required to pay disability benefits to eligible employees in a timely fashion. The following penalties apply to employers that fail to timely pay disability benefits.
BAD FAITH DENIALS
The penalty for denying any workers’ compensation claim in bad faith is the amount of the unpaid benefits, but subject to a maximum fine of $500. The TWCL specifies that bad faith includes denying a claim based on the fact that an employee filed a lawsuit.
NONCOMPLIANCE WITH PROCESSES FOR RESOLVING DISPUTED CLAIMS
The TWCL establishes several programs to help resolve disputed claims. Employers that do not cooperate with the Division or that do not follow all requirements face penalties under the TWCL. Specifically, the Division may assess fines ranging from $50 to $5,000 for an employer’s failure to:
- Attend any scheduled alternative dispute resolution proceedings (in person or through a representative) or give prior notice of nonattendance;
- Arrive at any scheduled alternative dispute resolution proceedings on time or give prior notice of tardiness;
- Have authority to enter final settlement at the beginning of mediation;
- Be prepared to mediate all disputed issues;
- Mediate in good faith;
- Cooperate with services provided by an ombudsman;
- Comply with court rules;
- Comply with any order or judgment; or
- Satisfy terms of an approved settlement.
FAILURE TO ESTABLISH A SAFETY COMMITTEE
The TWCL requires employers with a modification factor of 1.2 or higher to establish a safety committee. Employers that fail to establish a safety committee when required to do so expose themselves to a civil penalty of up to $2,000.
The Division may investigate any employer for fraudulent conduct relating to workers’ compensation. Any fraudulent activity may be punishable as criminal theft. The penalties for this may include both monetary fines and jail time, depending on the amount of money involved in the fraudulent activity.
Reporting and Filing
The TWCL requires employers to file various forms with the Division at specified times. In addition to the penalties described above, employers may be fined for failure to comply with filing requirements.
Employers must file an Employer’s First Report of Injury when an employee sustains a work-related injury. The first notice of injury is due as soon as possible, but:
- No later than 14 days after the injury if the employee is off work for more than seven days; or
- By the 15th of the following month if the employee returns to work within seven days.
Employers that fail to file the first report of injury within these time frames are subject to a $25 penalty for every 15 days the report remains unfiled.
Employers must notify the Division whenever they make an initial payment of benefits. Failure to do so may result in fines of $10 for every 15 days until the initial payment is made and the Division receives notice, or $200.
Employers must also notify the Division if they stop paying or modify the amount of an employee’s workers’ compensation benefits. Failure to file any such notice may result in fines of $10 for every 15 days past the change or stop date, until the Division receives the notice. The same penalty applies for employers that fail to notify the Division when they deny an employee’s claim for benefits.
In addition, upon making a final payment, the TWCL requires employers to send the Division a notice listing all payments made on the claim. This notice is due within 30 days of the final payment. The penalty for failure to comply with this notice requirement is $50 for every 15 days of delay, until the Division receives the notice.
Finally, employers must also file certified copies of every workers’ compensation judgment or court-approved settlement within 10 days of the date when the court issues the judgment or approves the settlement. Failure to comply with this requirement exposes employers to a $50 fine.