A contractor discovers their workers' compensation policy lapsed 30 days ago. An employee was injured yesterday. What is the potential penalty under NC law?
Correct Answer
D) License suspension and fines
NC workers' compensation law can result in license suspension and significant fines for contractors operating without required coverage.
Why This Is the Correct Answer
NC workers' compensation law (G.S. § 97-94) imposes serious consequences for contractors who operate without required workers' comp coverage, including license suspension by the NCLBGC and significant financial fines. When an injury occurs while coverage is lapsed, the contractor becomes personally liable for all workers' comp benefits AND faces regulatory penalties, making license suspension and fines the most comprehensive and accurate answer.
Why the Other Options Are Wrong
Option A: Criminal charges only
Criminal charges alone is an incomplete answer. While willful failure to carry workers' comp can be a criminal offense in egregious cases, the standard regulatory response is license suspension and fines — not criminal prosecution as the primary or sole penalty.
Option B: Fine up to $100 per day without coverage
A fine of $100 per day without coverage significantly understates the actual penalty exposure. NC penalties for uninsured employers include per-day fines but also license suspension and liability for all employee injury costs — $100/day alone does not capture the full consequence.
Option C: Warning letter
A warning letter is not a realistic consequence when a lapse has already occurred and an employee has been injured. Warning letters might apply to minor administrative oversights before any harm occurs — not to a 30-day lapse coinciding with a workplace injury.
Memory Technique
Think 'Lapse = License Lost + Fines.' Workers' comp is not optional in NC. A lapse doesn't just cost money — it puts your license at risk. The injury makes it worse: the contractor now pays all the employee's benefits personally ON TOP of the penalties.
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