Audit says Industrial Commission must ensure businesses carry workers' comp

mlocke@newsobserver.comFebruary 19, 2013 

Beth Wood

SCOTT CHMELAR

— The state Industrial Commission has failed in its responsibility to make sure businesses protect workers by carrying insurance to cover their injuries, according to a state audit released Tuesday.

Commission leaders vowed to do better, and said they were already acting on some of the audit’s recommendations.

The performance audit follows News & Observer reports last year that as many as 30,000 employers are breaking the law by failing to carry workers’ compensation insurance. The commission, which decides disputed workers’ compensation claims, did little to detect businesses openly skirting their responsibility to carry insurance.

Each year, many of the more than 300 injured workers whose bosses didn’t have insurance are pushed to the brink, often forced to rely on social services and relatives’ charity after they get hurt on the job.

The audit called on commissioners to follow up on data provided by the North Carolina Rate Bureau on policies that lapse or are cancelled. According to the audit, 11,323 businesses cancelled their coverage or let it lapse last year, but the commission never checked with those companies to find out why.

The audit recommends contacting those businesses to seek a response and immediately begin assessing penalties until the companies reinstate their insurance.

“The lack of follow-up could leave North Carolina’s citizens at risk unnecessarily,” the report said.

The report also echoes findings in a N&O series last August. The series, “The Ghost Workers,” revealed that state agencies fail to share data that could enable agencies to detect businesses that are breaking the law.

The audit comes as the General Assembly considers a bill that would give the GOP-controlled legislature and Gov. Pat McCrory more control over state boards and commissions. Under that legislation, all six commissioners on the Industrial Commission could be replaced this spring.

The audit urges commissioners to mine data from the state Division of Employment Security and the N.C. Rate Bureau, which keeps information on employers’ workers’ compensation insurance, to detect businesses skimping on insurance. Commissioners said in response to the audit that they have started this process, conferring with both the state controller and SAS in Research Triangle Park to analyze and use this data.

“We thank the auditor and her team for their work, and the commission has already taken steps to address some of the issues,” Staci Meyer, chairwoman of the commission, said in a written statement.

The audit sharply criticized the Industrial Commission for being lax with penalty enforcement and collection for uninsured businesses, saying that the commission cheated the state’s schools of needed funds. Penalties for failing to carry insurance, at least $50 a day, go toward public education.

The commission assessed $79,025 in fees against uninsured businesses in fiscal year 2011 and collected $59,925 of that.

Last May, after the N&O’s report on uninsured employers, the commission recalled old cases and began assessing fines against businesses that hadn’t carried insurance when their workers got hurt.

Since then, the commission has assessed $6.5 million in fines, collecting $106,334. The audit praised the increased penalties but said “nothing prevented the Commission from operating this way in the past.”

The commission uses penalties as a way to ensure the injured worker is paid. Often, commissioners waive penalties once the employer pays the claim to the injured worker.

Commissioners defended the practice in their response to the audit and pointed to other states, such as South Carolina and Wisconsin, which established programs to cover expenses of workers hurt while employed by an uninsured employer.

Locke: 919-829-8927

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