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Workers Compensation Fraud by Employees Gets Lots of Press while Fraud by Employers Costs Big Money

We see regular media reports of employees filing false workers compensation claims, collecting benefits while their Facebook page shows them partying the night away and other actions inconsistent with legitimate disability. Unfortunately, those cases do happen, but it’s not just employees who are trying to work the system. Employers do it too, all too often. How big a problem is it?

In 2011, a New York Supreme Court grand jury estimates the cost to the city and state of New York is approximately $500 million in the local construction industry because employers misclassified the type of work their employees did to get lower workers’ compensation premiums, according to the website Property Casualty 360. The grand jury looked at applications for, and audits of, workers’ compensation policies.

The NY grand jury examined the vulnerability of New York’s workers’ compensation insurance system to employer fraud and misuse and found that the largest losses were from unpaid workers’ compensation premiums, with personal income tax, withholding, unemployment insurance and various other business taxes accounting for the rest. More egregious fraud involved employers misclassifying workers, who are required to be insured under the system, as independent contractors rather than employees, according to New York County prosecutor Cyrus Vance.

Vance is quoted as saying New York’s workers compensation system is vulnerable because it requires employer self-reporting, and is “easily abused by unscrupulous employers who misclassify employees.” He says the grand jury determined, “Employers can easily lie about what work a particular employee performs, for example, reporting a roofer as a clerical worker, and thus paying a significantly lower premium.”

Dishonest employers get lower workers compensation premiums and those lower costs can give them a competitive advantage, according to Vance. “Overall, premium fraud generates an unfair business environment in which honest business owners cannot compete with rogue employers and are either forced out of the market or dissuaded from entering it in the first place,” Vance says.

In 2012, an estimated 30,000 North Carolina employers broke the law by not having the proper workers compensation coverage. If you believe your employer is engaged in workers compensation fraud, you can report it to the North Carolina Industrial Commission Fraud Investigations Section by calling (888) 891-4895.

If you are injured at work and your employer doesn’t have the proper insurance coverage, you still may have options to seek compensation for your injuries. Contact my office for a free consultation so we can discuss your situation.