Indiana Workers’ Compensation Violations and Penalties: Fines and Defenses

Indiana workers’ compensation violations and penalties fall into a few well-defined categories: operating without insurance, ignoring the Workers’ Compensation Board’s requests for proof of coverage, hiring uninsured contractors, failing to report injuries, and committing premium fraud. The sharpest penalty is for going without coverage at all, which is a Class A infraction under IC 22-3-5-1 and exposes the employer to a court injunction shutting the business down, direct out-of-pocket liability for every benefit the injured worker would have received, and civil fines of $100 per day.¹²

Operating Without Coverage

Every Indiana employer must either buy workers’ compensation insurance from an authorized carrier or satisfy the Workers’ Compensation Board that it has the financial strength to pay claims directly as a self-insurer. The duty applies whether workers are full-time or part-time.³

An employer that violates IC 22-3-5-1 by not securing coverage commits a Class A infraction. The Board can also go to court and obtain an injunction forcing the business to stop operating until it comes into compliance.¹

The deeper financial exposure sits outside the infraction itself. When an uninsured employer’s worker gets hurt, the employer owes every dollar the system would have paid: medical bills, surgery, hospital stays, lost wages, impairment awards, and in a fatal case burial expenses and dependents’ death benefits. There is no insurer to absorb any of it.

A narrow set of workers sits outside the system and does not trigger the coverage duty at all. Railroad employees fall under the Federal Employers’ Liability Act. Workers in interstate or foreign commerce covered by a federal compensation scheme are excluded. Independent contractors who file with the Department of State Revenue and hold a certificate of exemption are not subject to the act. Real estate professionals, scholarship athletes, inmates, and volunteers are also outside the system.²⁴ Certain agricultural labor is also exempt depending on the arrangement. For everyone else, coverage is required.

The $100-a-Day Penalty for Ignoring the Board

When the Workers’ Compensation Board asks an employer to prove it has current coverage, the employer has 10 days to respond. Miss that window and the Board issues a written violation notice and can assess a civil penalty of $100 per day. The daily penalty runs retroactively, from the date of the Board’s original request through the date the employer finally produces acceptable proof.²

Because the clock runs backward to the first request, delay compounds quickly. An employer that drags its feet for a month before responding can be looking at thousands of dollars in penalties even if coverage was in place the entire time.

Liability for Uninsured Contractors

Hiring a contractor does not shift the compensation risk automatically. Any business that hires a contractor for work exceeding $1,000 without first obtaining a certificate from the Workers’ Compensation Board showing the contractor carries coverage becomes jointly liable for injuries to the contractor’s employees. The same rule reaches down the chain: a contractor who sublets work without verifying the subcontractor’s coverage picks up the same joint liability.

Joint liability includes medical expenses, hospital fees, and burial expenses. The practical lesson is simple. Before paying a contractor for anything above the $1,000 threshold, get the Board certificate in hand.

Failing to Report Injuries

Employers have two reporting duties when a worker is hurt. The injury must be reported to the insurance carrier, and any injury that causes at least one day of missed work must be reported to the Workers’ Compensation Board on a First Report of Employee Injury, Illness, or Fatality. Failing to report is a Class C infraction under IC 22-3-4-13.¹

Inaccurate reports create the same exposure as missing ones, and they delay care for workers who need treatment immediately. Allegations that an employer failed to report an injury are among the matters the Board can handle through its informal dispute process.⁵

A related obligation that often goes overlooked: every covered employer must post a workplace notice telling employees the job is covered by workers’ compensation, including the name, address, and phone number of the insurance carrier or the person who administers claims for a self-insured employer. For mobile or remote workers, the same information has to go out electronically or in whatever format the employer uses for other employment communications.⁶

Misclassification and Premium Fraud

The compliance problem the Board sees most often is employers calling workers independent contractors to avoid paying premiums. The label on the paperwork does not control the question. Courts look at how much control the employer exercises over the work, how the worker is paid, and who provides the tools and equipment. A worker contractually labeled an independent contractor can still be reclassified as an employee if the hiring party dictates when, where, and how the work gets done.

Premium fraud is the other recurring problem. Insurance premiums are tied to payroll size, so some employers understate payroll to the carrier. Common tactics include paying workers in cash off the books, routing payroll through shell companies, and dressing up wages as reimbursements. The practice shortchanges insurers and gives the cheating employer an unfair edge over competitors paying honest premiums.

What Employees Can Do if an Employer Isn’t Covered

If you were hurt on the job and discover your employer carried no workers’ compensation insurance, the uninsured status does not strip you of benefits. It makes the employer personally responsible for them. You still file an Application for Adjustment of Claim with the Workers’ Compensation Board, and the Board can pursue the employer directly.

The deadline matters here more than almost anywhere else. You have two years from the date of the accident to file a claim with the Board. If the injury caused death, the two-year clock runs from the date of death. For radiation injuries, the two years runs from the date you knew or should have known about the injury.⁷ Miss it and the right to compensation is permanently barred.

You also need to give your employer written notice of the injury as soon as practicable, and within 30 days if the employer doesn’t already know about it. Late notice doesn’t automatically kill a claim, but it gives the employer a prejudice argument and compensation won’t start accruing until notice is given.⁸

How Violations and Disputes Get Decided

Most compliance matters and benefit disputes start informally. The Board handles billing problems, payment delays, disagreements over whether a claim is compensable, carrier-to-carrier disputes over cumulative injuries, and failure-to-report allegations through its informal dispute process without any formal filing.⁵

If informal resolution doesn’t work, the next step is a formal hearing. The injured worker (or the Board, in a compliance proceeding) files an Application for Adjustment of Claim, the matter is assigned to a Single Hearing Member, and both sides present evidence. The injured worker carries the burden of proving an accidental injury occurred during the course and scope of employment. Medical evidence drives most cases. The Single Hearing Member issues a written award with findings of fact and conclusions of law. Each side is entitled to one continuance. An employee can appear without counsel, but a corporation must be represented by an attorney.⁹

Either side can appeal the Single Hearing Member’s decision to the full Board. From there the appeal runs to the Indiana Court of Appeals, and in rare cases to the Indiana Supreme Court. Appellate courts look for legal errors rather than re-weighing evidence.

Employer Defenses

Not every workplace injury ends in a payable claim, and the Board recognizes several employer defenses under IC 22-3-2-8. Compensation is barred when an injury is self-inflicted, caused by the employee’s intoxication, sustained while committing an offense, or caused by the employee knowingly failing to use a provided safety appliance, knowingly disobeying a reasonable written rule posted in a conspicuous place, or knowingly failing to perform a statutory duty.¹⁰ The employer carries the burden on each of these, and the recurring word is “knowingly.” A reflexive mistake or momentary lapse is not enough.

Employers can also contest whether the injury arose out of and in the course of employment. An injury during a lunch break off premises, for example, may not qualify. On that threshold question, the worker carries the burden.

Bad-Faith Penalties

When an employer, its administrator, or its insurer acts in bad faith in adjusting or settling a claim, the Board can assess additional compensation and set the claimant’s attorney fee. Under IC 22-3-4-12.1, the attorney fee in a bad-faith award cannot exceed one-third of the award.¹¹

1
Indiana Compensation Rating Bureau. Workers Compensation Requirements and Penalties – Indiana
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Worker’s Compensation Board of Indiana. Compliance
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Worker’s Compensation Board of Indiana. Who Is Eligible
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Indiana Compensation Rating Bureau. Excluded Workers
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Worker’s Compensation Board of Indiana. Informal Disputes
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Indiana General Assembly. Indiana Code 22-3-2-22 – Notice; Workers Compensation Coverage; Mobile or Remote Employees
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Indiana General Assembly. Indiana Code 22-3-3-3 – Limitation of Actions; Radiation
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Indiana General Assembly. Indiana Code 22-3-3-1 – Notice of Injury; Time
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IN.gov. WCB: Disputed Claims
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Indiana General Assembly. Indiana Code 22-3-2-8 – Qualifications; Burden of Proof
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Indiana General Assembly. Indiana Code 22-3-4-12.1 – Bad Faith in Adjusting or Settling Claim