A contractor discovers their workers' compensation policy lapsed for 15 days during an active project. What is the most likely consequence under Michigan law?
Correct Answer
B) Fine and license suspension
Michigan requires continuous workers' compensation coverage. A lapse typically results in fines and potential license suspension until compliance is restored and penalties are paid.
Why This Is the Correct Answer
Michigan law requires continuous workers' compensation coverage for all contractors with employees. A lapse in coverage — even brief — violates state law and typically results in monetary fines and potential license suspension until coverage is reinstated and penalties are resolved. This is the proportionate regulatory response to a coverage gap.
Why the Other Options Are Wrong
Option A: Criminal prosecution
Criminal prosecution is not the standard response to a workers' comp lapse in Michigan. Criminal charges are reserved for intentional, egregious violations — not a 15-day administrative lapse in coverage.
Option C: Warning letter only
A warning letter only is not the typical consequence. Michigan takes workers' compensation lapses seriously because uninsured employees are at risk during the gap period. A warning-only response understates the regulatory consequences.
Option D: Automatic license revocation
Automatic license revocation overstates the consequence for a 15-day lapse. Revocation is generally reserved for repeated or willful violations, not a first-time or short-duration lapse. The standard response is fine and suspension (not permanent revocation).
Memory Technique
Think of a workers' comp lapse like a driver with a lapsed insurance policy: you don't go to jail (criminal), and you don't permanently lose your license (revocation) — but you do get fined and your driving privileges suspended until you fix it. Same principle for contractor workers' comp.
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