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Definition of Penalty

Penalty, penalties in most states are what are assessed to an employer who does not have workers' compensation insurance coverage for their employees or who allows their workers' compensation insurance coverage to lapse. The penalty or penalties for this vary from state to state, but they are significant. For example, in Florida, the Division of Workers' Compensation may issue a Stop-Work Order that ceases all business operations of an employer and assess a penalty that is equal to 1.5 times the amount that the employer would have paid in premium within the preceding three-year period. In New York, an employer is liable for a penalty of $2,000 per 10-day period of noncompliance plus any other penalties the Workers' Compensation Board assesses for noncompliance.

However, in California, penalty also refers to an amount of money that an injured worker receives because something was not done correctly in their workers' compensation claim. This is paid by the injured worker's employer or their employer's workers' compensation insurance company. The penalty amount may be an automatic 10 percent for a delay in one payment to the injured worker. For an unreasonable delay, it can be a 25 percent penalty, up to $10,000.

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