Workers’ Compensation Insurance Requirements – New Jersey law requires that all New Jersey employers not covered by state plans have workers’ compensation coverage or be authorized to self-insure. Even out-of-state employers may require workers’ compensation coverage if an employment contract is entered into in New Jersey or if work is performed in New Jersey.
A Workers’ Compensation Insurance policy written by a joint or stock carrier authorized to write insurance in New Jersey. Payments for such insurance are based on the classification (category) of the work performed by the employees, information on the employer’s claims, and the employer’s roll.
Workers’ Compensation Insurance Requirements
Buying Insurance for yourself by applying to the Commissioner of Banking and Insurance. Authorization to self-insure is based on the employer’s financial ability to meet its obligations under the law and the sustainability of the business. The posting of collateral for such obligations may be required.
Workers Compensation Resources
A self-insured employer has the option of handling their own workers’ compensation claims or contracting with a third-party administrator (TPA) to provide these services. For more information about self-insurance, please see N.J.S.A. 34:15-77 of the New Jersey Workers’ Compensation Act or contact the Department of Banking and Insurance at (609) 292-5350, ext. 50099.
Note: Government agencies are required to provide workers’ compensation benefits to their employees but are not required to purchase insurance or be licensed as self-employed. They usually 1) get insurance, 2) participate in an insurance pool, or 3) maintain a separate budget for workers’ compensation.
*Financial consideration means any payment for services and includes cash or other payment in lieu of money such as products, services, shares or options to purchase business stock, food or accommodation, etc.
The New Jersey Workers’ Compensation Act is interpreted more liberally with respect to the definition of “employee” and is broader than the Internal Revenue Code and the Unemployment Compensation statute. Different employment relationships have been determined to be employer-employee, including some that would not appear to be a normal employment situation. In addition, a contract or other agreement that a person is an employee is not binding in determining whether employer status exists.
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New Jersey courts, in deciding this issue, have applied two tests: the “control test” and the “related type of work test.”
Under the “control test,” the relationship between the business and the individual is reviewed. There is employment if the business has the right to supervise the person and control what is done and how it should be done.
Under the “related to work test,” there is employment if the individual relies on income from the business and the work performed by the individual is an integral part of the business’s operations.
The New Jersey Compensation Rating and Inspection Bureau (NJCRIB), an agency of the New Jersey Department of Banking and Insurance, is responsible for establishing and maintaining regulations and premium ratings for workers’ compensation and employers’ liability insurance.
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Workers’ compensation insurance can be obtained from any of the more than 400 private insurance companies authorized to sell workers’ compensation policies in New Jersey. A policy can be purchased directly from an insurance carrier, an insurance agent, or an insurance broker.
For assistance in obtaining coverage, please contact: New Jersey Compensation Rating and Inspection Bureau 60 Park Place Newark, NJ 07102 www.njcrib.com (973) 622-6014
The primary tool used to determine workers’ compensation insurance premiums is the classification system, which groups New Jersey businesses into various categories. The purpose of this program is to bring together, within each category, employers who do the same type of business.
Accompanying each category is a rating that represents the average occupational injury experience for that category. This rate is adjusted annually based on the most recent data available on occupational injury experiences.
Workers Compensation Exemption Form
It is also recognized that no two employers, although they may be in the same business, have exactly the same jobs or the same employment conditions. Within any given classification, there are employers with a better than occupational average injury experience and those with a worse than occupational average injury experience. To address such differences, further refinement in the classification system is provided by another system known as the Experience Rating System. In this system, the employer’s work injury experience is used to change its premium, higher or lower, by comparing it to the average work injury experience of all employers in the category in which the employer is assigned.
For more information about how rates are established, you may wish to read the WC Reference Guide available on the NJCRIB website at www.njcrib.com1ReferenceGuidelcribcnst.asp
The consequences of failing to provide workers’ compensation coverage can be enormous, even without a work-related injury. In particular, the law provides that failure to insure is a criminal offense and, if determined to be knowing, a fourth offense.
Penalties for such failure may be assessed up to $5,000 for the first 10 days and additional assessments of $5,000 for each 10-day period of failure to insure thereafter. In the case of a business, liability for failure to insure can extend to individual corporate officers. Penalties assessed for failure to insure cannot be waived if you are insolvent.
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Where a work-related injury or death occurs, the employer, including individual corporate officers, partners or LLC members, is directly responsible for medical expenses, temporary disability, and permanent disability or dependency benefits. In addition to awards for medical expenses and other benefits, New Jersey law also provides for civil penalties against an employer and its officers in the event of a failure to insure. Awards and penalties from these claims can become liabilities against the uninsured employer and its officers, which are generally enforceable in the Superior Court of New Jersey against any assets belonging to the uninsured employer and its officers. For more than a century, governments have pursued the goal of social policy: to protect workers from work-related injury, disability, illness and death in a compassionate and sustainable manner that allows for the economic activity and innovation necessary for societies to function and thrive. Requiring employers to provide financial compensation to workers or their families for work-related injuries, illnesses and deaths is fundamental to achieving this objective. In the US, Canada, and Australia (and New Zealand, similarly), workers’ compensation insurance arrangements meet that requirement, with each jurisdiction deciding which insurance plan is most appropriate in its context.
The workers’ compensation insurance market is far from a free market place. Government intervention changes the market. The most common intervention is to make workers’ compensation insurance mandatory and more or less universal. State acts determine not only who must carry workers’ compensation insurance but who can provide insurance locally.
Workers’ compensation insurance, like other insurance, transfers the financial risk associated with certain losses from insurer to insurer in exchange for payment. When workers’ compensation payments are authorized, insurance must be in place; if insurers are unwilling to underwrite the risk or the risk premium is greater than the insured employers are willing or able to pay, businesses cannot operate. If too few insurers are willing to enter, stay, and underwrite work-related risks in the workers’ compensation insurance market, the cost of workers’ compensation and its availability may stifle economic activity and growth, disappointing the achievement of a public policy objective.
, governments intervened in a variety of ways [see the post, “What is the connection between market failures and workers’ compensation?”, Workers’ Comp Perspectives, August 9, 2016 ]. Government intervention ranges from implementing pricing regulation to creating
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In establishing “public funds” to meet some or all of the workers’ compensation insurance needs in a particular jurisdiction. Intervening in the workers’ compensation insurance market through legislation or federal fund creation alters the market environment, alters incentives, and affects costs (profit margins, administration, oversight and overhead)—all of which have systemic consequences.
Each state decides which insurance arrangement best meets public policy objectives in its social, political, economic and historical context. There is no “right” or “best” insurance arrangement. The choice of a particular insurance arrangement is a legal decision; As long as the law enabling the arrangement is constitutional and supported by the community it serves, choosing one model over all other arrangements is a powerful issue. With that in mind, the purpose of this discussion is to provide a framework for defining, organizing and classifying the existing workers compensation insurance arrangements in the US, Canada, Australia and New Zealand.
Workers’ compensation insurance arrangements are organized continuously between completely private insurance providers (with different levels of control and supervision) in special “government funds”, of which a single, government-created, regulated, or authorized agency is the only one. a state or provincial workers’ compensation insurance provider. Competitive public funds, non-competitive public funds, and certain government mutual funds are among these two key areas (private underwriting and special public funds).
The workers’ compensation market usually includes all employers who are legally required to carry workers’ compensation insurance or voluntarily choose to be covered when the laws permit. In markets where private insurance or public funds are competitive, employers can’t afford it