It is a violation of the workers' compensation law in New York, including in New York City, for an employer to not obtain workers' compensation coverage for its employees. Recently, the state Inspector General arrested two employers for the workers' compensation crime of Failure to Secure Compensation. Each of the employers were ordered to pay fines and surcharges provided by law.
Both defendants were working as residential roofing contractors. They fraudulently certified in building permit applications that they had no employees. Investigators could easily observe the work sites and determine that each defendant had several workers. The cases were prosecuted through the Montgomery County District Attorney's Office. Despite being called a criminal prosecution, however, there was no punishment in the cases other than the payment of monetary fines.
Incarceration is possible under the law if the employer's violation is repetitive or especially egregious in nature. The purpose of workers' compensation coverage is to assure that every worker is covered for work-related injuries and death without regard to fault. Employers benefit under the system by being free generally of being sued by employees for negligence in causing workplace injuries. However, the system breaks down when the employer does not live up to its part in the trade-off when it fails to purchase insurance.
The purpose of the law is frustrated in that instance and not only will the employer be prosecuted for failing to have workers' compensation insurance, but generally that fact also frees the employee to sue the uninsured employer for negligence and wrongdoing that contributed to the worker's injury. The rule is particularly critical in New York City where heavy construction work is generally occurring. With a high volume of construction accidents and injuries, the system would be crippled if employers felt free to ignore the important provisions of the law that require insurance coverage.
Source: workerscompensation.com, "2 NY Building Contractors Plead Guilty To Workers' Comp Fraud", Jan. 26, 2017