Provides incentives for productive workers' compensation audits.
TITLE OF BILL: An act to amend the workers' compensation law, in relation to providing incentives for productive workers' compensation audits
PURPOSE: To prevent workers' compensation insurance fraud by ensuring that all employers in the State are appropriately classified
SUMMARY OF PROVISIONS:
Section 1 of the bill would add a new Section 112-A to the Workers' Compensation Law.
Paragraph (a) of subdivision one of such Section would require periodic audits, including but not limited to, payroll records verifications and onsite physical inspections, in order to determine each employer's unique experience-rated operations for premium calculations. Construction class employers shall be audited annually and all other employers not less than biennially
Paragraph (b) of subdivision one such Section would make a knowing misrepresentation or concealment of material information in order to avoid proper classification for purposes of premium calculations, a fraudulent insurance practice in violation of applicable provisions of Workers' Compensation Law Section 114 and Penal Law Section 176.05.
Subdivision two of such Section would exempt self-insureds from the provisions of the Section.
Subdivision three of such Section defines "construction class."
Section 2 of the bill sets forth the effective date
JUSTIFICATION: In order to combat Workers' Compensation Insurance fraud and hold down premiums charged, especially in the construction industry, periodic audits are necessary. Productive employer audits are beneficial, since they (1) protect workers by ensuring adequate workers' compensation coverage; (2) true-up premium, often leading to return of premium or credits against future installments; and (3) provide adequate premium for the appropriate risk classification. For instance, a roofing contractor claiming to be a kitchen remodeler leads to data corruption at the New York Compensation Insurance Rating Board and ultimately in the rate-making at the Division of Insurance of the Department of Financial Services.
Often, employers who refuse an audit are attempting to avoid paying the appropriate Workers' Compensation premium Experience in states that have a periodic audit statute in place (like Florida, California, North Carolina and South Carolina) shows that appropriate premium from an employer who refuses an audit may be in excess of established penalty provisions for such refusals. This bill would make clear the penalties for refusing
to submit to the standard practice of audits of workers' compensation insurance policies, and would restate that refusal to permit an audit of payroll records and knowing misrepresentation or concealment of the number and type of employees and actual work performed could constitute criminal insurance fraud.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: This act shall take effect January 1, 2015.
STATE OF NEW YORK ________________________________________________________________________ 5376--B Cal. No. 385 2013-2014 Regular Sessions IN SENATE May 16, 2013 ___________Introduced by Sens. SEWARD, AVELLA -- read twice and ordered printed, and when printed to be committed to the Committee on Labor -- commit- tee discharged, bill amended, ordered reprinted as amended and recom- mitted to said committee -- recommitted to the Committee on Labor in accordance with Senate Rule 6, sec. 8 -- reported favorably from said committee, ordered to first and second report, ordered to a third reading, amended and ordered reprinted, retaining its place in the order of third reading AN ACT to amend the workers' compensation law, in relation to providing incentives for productive workers' compensation audits THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The workers' compensation law is amended by adding a new section 112-a to read as follows: S 112-A. AUDITS OF EMPLOYERS. 1. (A) EMPLOYERS IN ALL CLASSES OTHER THAN THE CONSTRUCTION CLASS SHALL BE AUDITED NOT LESS FREQUENTLY THAN BIENNIALLY AND THE CHAIR OR BOARD MAY PROVIDE FOR MORE FREQUENT AUDITS OF EMPLOYERS IN SPECIFIED CLASSIFICATIONS BASED ON FACTORS SUCH AS AMOUNT OF PREMIUM, TYPE OF BUSINESS, LOSS RATIOS, OR OTHER RELEVANT FACTORS. IN NO EVENT SHALL EMPLOYERS IN THE CONSTRUCTION CLASS, GENERAT- ING MORE THAN THE AMOUNT OF PREMIUM REQUIRED TO BE EXPERIENCE RATED, BE AUDITED LESS FREQUENTLY THAN ANNUALLY. THE ANNUAL AUDITS REQUIRED FOR CONSTRUCTION CLASSES MAY BE A PHYSICAL, ONSITE REVIEW OF ORIGINAL PAYROLL RECORDS, EMPLOYEE RECORDS, CHECKBOOKS, CASH BOOK (DISBURSEMENTS AND RECEIPTS), GENERAL LEDGER, CONTRACTS, TAX RETURNS INCLUDING QUARTER- LY PAYROLL FILINGS, AND ORIGINAL CERTIFICATES OF INSURANCE. THE AUDIT OF ALL EMPLOYERS SHALL BE CONDUCTED NO MORE THAN ONE HUNDRED TWENTY DAYS AFTER THE EXPIRATION OF A POLICY PERIOD. AT THE COMPLETION OF AN AUDIT, IF REQUESTED BY THE AUDITOR, THE EMPLOYER OR OFFICER OF THE CORPORATION MUST PRINT AND SIGN THEIR NAMES ON THE AUDIT DOCUMENT AFFIRMING THE ACCURACY OF THE INFORMATION PROVIDED THEREIN. AS REQUIRED BY SECTION ONEEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD11025-08-4 S. 5376--B 2
HUNDRED TWELVE OF THIS ARTICLE, EMPLOYERS SHALL MAKE AVAILABLE ALL BOOKS AND RECORDS NECESSARY FOR THE PAYROLL VERIFICATION AUDIT AND PERMIT THE AUDITOR TO MAKE A PHYSICAL INSPECTION OF THE EMPLOYER'S OPERATION. IF AN EMPLOYER FAILS TO PROVIDE REASONABLE ACCESS TO ALL SUCH BOOKS AND RECORDS NECESSARY FOR A PAYROLL VERIFICATION AUDIT, INCLUDING A PHYSICAL INSPECTION OF THE EMPLOYER'S OPERATION, THE EMPLOYER SHALL PAY A SURCHARGE TO THE CARRIER OF TWO TIMES THE MOST RECENT ESTIMATED ANNUAL PREMIUM. (B) EMPLOYERS THAT FAIL TO PROVIDE REASONABLE ACCESS TO THE CARRIER FOR THE PURPOSE OF CONDUCTING AN AUDIT SHALL BE REPORTED TO THE NEW YORK COMPENSATION INSURANCE RATING BOARD. (C) IF AN EMPLOYER KNOWINGLY UNDERSTATES OR KNOWINGLY CONCEALS PAYROLL, KNOWINGLY MISREPRESENTS OR KNOWINGLY CONCEALS EMPLOYEE DUTIES SO AS TO AVOID PROPER CLASSIFICATION FOR PREMIUM CALCULATIONS, OR KNOW- INGLY MISREPRESENTS OR KNOWINGLY CONCEALS INFORMATION PERTINENT TO THE COMPUTATION AND APPLICATION OF AN EXPERIENCE RATING MODIFICATION FACTOR, SAID KNOWING MISREPRESENTATIONS OR KNOWING CONCEALMENTS SHALL BE CONSID- ERED FRAUDULENT PRACTICES IN VIOLATION OF APPLICABLE PROVISIONS OF SECTION ONE HUNDRED FOURTEEN OF THIS ARTICLE AND INSURANCE FRAUD IN VIOLATION OF APPLICABLE PROVISIONS OF SECTION 176.05 OF THE PENAL LAW. (D) IF DURING THE COURSE OF AN AUDIT CONDUCTED UNDER THIS SECTION, AN INSURANCE CARRIER OBTAINS INFORMATION INDICATING A VIOLATION OF THE PROVISIONS OF PARAGRAPH (C) OF THIS SUBDIVISION, THEN THE CARRIER SHALL REPORT SUCH INFORMATION TO THE BOARD. 2. THIS SECTION SHALL NOT APPLY TO EMPLOYERS THAT SELF-INSURE OR EMPLOYERS THAT ARE MEMBERS OF A WORKERS' COMPENSATION GROUP SELF-INSURED TRUST. 3. FOR THE PURPOSES OF THIS SECTION, "CONSTRUCTION CLASS" MEANS THE WORK OR OCCUPATION DESCRIBED IN "GROUP 3" OF SUBDIVISION ONE OF SECTION THREE OF THIS CHAPTER. S 2. This act shall take effect January 1, 2015.