byline: Michele Lewane

Raising a kid and running a business have at least one thing in common: nobody hands you an instruction manual on day one.

A lot of business owners have a vague idea about what worker’s comp is and how it works, but they’re hazy on specifics.

Worker’s comp is complex, after all — the labyrinthine creation of centuries of law. Relatively few small business owners have taken a course on it, and the state generally just assumes that you know what’s required of you.

But there are a lot of myths and misconceptions out there. If you’re working on the wrong assumptions, you could end up paying too much for your insurance or, even worse, facing substantial legal liability and/or state-imposed fines.

Read on for five of the most common mistakes that small business owners make about worker’s comp.

1. Assuming the Virginia worker’s comp rules mirror other states

Worker’s comp is a creation of state law, and the rules vary from one state to the next. If you used to live in North Carolina but are now operating in Virginia, don’t assume that what you know about worker’s comp is still true.

It’s also important to note that worker’s comp law applies wherever your employers are working, not necessarily where your business is headquartered. So if you have a Tennessee-registered company with workers laboring in Tennesse, Virginia, North Carolina, and Kentucky (for example) — or if your employers cross state lines in the course of their job duties — you may need to comply with the worker’s comp requirements in each state.

2. Confusing Worker’s Comp with Liability Insurance

It’s easy to confuse worker’s comp insurance with general liability insurance. Make no mistake: these are two different types of insurance, and your business needs to carry both (with sufficient coverage). Your general liability policy will not cover a worker’s comp claim from an injured employee, nor will your worker’s comp insurance cover an injury claim from a visitor or customer.

And no, you cannot name your employees as “additional insureds” on your general liability policy as a way to avoid carrying worker’s comp insurance.

3. Believing you can’t control your worker’s comp costs

The best way to avoid a costly worker’s comp premium is to ensure a safe working environment in the first place.

Hire carefully. Inspect the sales floor or work space regularly. Train your employees extensively. These things might seem like burdens, but I encourage you to see them as opportunities instead — opportunities to avoid a claim and keep insurance costs down.

Additional strategies for lowering worker’s comp premiums include: reporting claims promptly, getting injured workers immediate medical treatment to minimize their medical damages, creating return-to-work opportunities (or transitional duty opportunities) for injured workers to minimize lost wages, and so on.

4. Not learning from prior claims

Already faced a claim in the past? Learn from it. Refusing to modify your business practices after an accident is simply setting the stage for a similar injury in the future. Most workplace accidents are preventable, so make prevention your mission.

5. Letting your worker’s comp policy lapse  

Like any other kind of insurance, worker’s comp is something you hate paying for every month but are so glad you have when a claim comes in. More to the point, for many small business owners in Virginia, maintaining worker’s comp coverage is required.

If an accident occurs during an accidental lapse of coverage, your business could be exposed to extensive liability (not to mention up to $50,000 in fines from the state). Sustained failure to carry worker’s comp coverage in violation of Virginia law can even result in criminal prosecution for the employer. So make sure you keep that policy in place!

Michele Lewane is a Virginia worker’s compensation attorney at the Injured Workers Law Firm in Richmond.