Editor's Notebook: Outing Deadbeat Employers

Don’t kid yourself: Injured employees aren’t the only ones hurt when deadbeat employers refuse to pay their fair share into state workers’ compensation programs.

A new report from the Fiscal Policy Institute estimates that between 500,000 and 1 million New York employees who should be covered by workers’ compensation insurance are not. Why? Because employers underreport the size of their work force, misclassify their employees as independent contractors to avoid paying payroll taxes and social insurance programs such as workers’ compensation and unemployment insurance or neglect to pay any workers’ compensation premiums at all.

Such actions are financially devastating for injured employees who turn to workers’ compensation insurance programs to pay their medical bills, only to find they are not covered. But it goes deeper than that. What’s going on with workers’ compensation in New York could be detrimental to the state’s economic climate. If things continue in this direction, the report says, workers’ compensation premium costs for all employers will increase and the costs of medical care for injured workers will shift to the injured workers and taxpayers.

“If things continue to go the way they are, it will be hard to improve benefits for workers and premiums will be unsustainable for employers,” says James Parrott, chief economist of the institute.

The report says a lack of enforcement by the state – encouraging deadbeat employers to continue lying and cheating the system – partly is to blame for the sad state of affairs.

You would think the insurance industry would insist that state governments crack down on scofflaws in an effort to protect employers who are honest when reporting employment and injury numbers, since responsible employers end up helping to pay for deadbeat ones. Surprisingly, this is not the case.

A spokesman for the American Insurance Association says he doubts that the report is accurate, calling the Fiscal Policy Institute “a labor-funded group that seems to have an agenda.”

Sounds to me like the agenda of the Fiscal Policy Institute is to shed light on a problem that exists in many states, not just New York. It should be on everyone’s agenda to “out” deadbeat employers who steal from the system, leaving both their employees – and the states where they do business – vulnerable.