A contractor is cited for working without proper workers compensation coverage. The base fine is $1,000. If their payroll for the violation period was $45,000, what is the total penalty?
Correct Answer
B) $2,800
Oregon calculates workers comp penalties as base fine ($1,000) plus 4% of payroll during violation period: $1,000 + (0.04 × $45,000) = $2,800.
Why This Is the Correct Answer
Oregon's penalty for operating without workers compensation coverage is calculated as a base fine of $1,000 plus 4% of payroll during the period of non-compliance. $1,000 + (0.04 × $45,000) = $1,000 + $1,800 = $2,800.
Why the Other Options Are Wrong
Option A: $1,450
$1,450 reflects an arithmetic error, possibly using a rate of 1% instead of 4%: $1,000 + (0.01 × $45,000) = $1,450. The statutory rate is 4%.
Option C: $1,000
$1,000 represents only the base fine with no payroll penalty added. Failing to include the payroll component is a common exam error.
Option D: $5,500
$5,500 is not derived from the correct formula. It may result from using a higher percentage (e.g., 10%) or other miscalculation.
Memory Technique
Penalty = $1,000 base + 4% of payroll. Remember '1000 + 4%' as a formula. The 4% reflects the approximate cost of workers comp insurance — the state essentially charges you what you should have paid.
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