Work Comp Fraud? What Fraud?

Despite what the media portray, workers’ comp fraud is extremely rare.

Workers are not “getting rich” from worker’s compensation! Accordingly, fraudulent behavior in work comp is very rare—like the one bad apple spoiling the bunch—but often highly publicized. (Because, let’s face it, seeing a surveillance video of someone bowling or water-skiing is far more memorable than a thousand images of an injured worker struggling to get out of bed in the morning or walk a city block).

Under Wisconsin’s nationally-recognized model, a worker who suffers an on-the-job-injury receives workers’ compensation benefits without regard to fault. By virtue of the work comp system, injured workers cannot sue their employers or receive jury awards. Instead, injured workers are eligible for lower, defined benefits, like lost wages and medical expenses—again, we’re not talking about “pie in the sky” numbers that would incentivize bad behavior!

“Fraud” is minimal to non-existent

  • In the last published study, Dept. of Workforce Development (DWD) concluded that public perception of workers’ compensation fraud is exaggerated. In a six year span, the amount of prosecuted fraud was less than one in 20,000 work injuries…or 0.0001%.1

Industry insiders don’t think this is a big deal

  • Rick Parks, the President/CEO of Society Insurance: “From the view of thousands of claims over decades, fraud is minimal in Wisconsin”2 
  • Chris Reader of Wisconsin Manufacturers & Commerce: despite the “sensational stories,” fraud is “few and far between” in the system.3

Current law already allows criminal prosecution for alleged “fraud”

  • Worker’s Compensation Division already has an existing fraud hotline for the public. Also, a carrier can report an alleged fraudulent claim to the DWD. After an investigation, DWD can refer to district attorney for prosecution of criminal insurance fraud. Thus, if there is fraudulent behavior, under current law, there can be a crime found.

Independent Medical Examinations provide protection against “fraud”

  • Insurance carriers can require an injured worker to be seen by a handpicked independent medical examiner, or IME. If questions exist about a worker’s injury, symptoms, or disability, the IME can provide an opinion—allowing a carrier to deny the worker’s claim.

“Fraud” goes both ways

  • We want fair competition in the marketplace and in business. Misclassifying employees or workplaces results in “stolen” premium dollars and an unfair business advantage. Likewise, limiting or under-reporting work injuries undermines the fairness and credibility of our efficient work comp ratings process and system.

 

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1 Department of Workforce Development, Annual Report for Calendar Year 1999 Allegations of Worker’s Compensation Fraud (annual average of 3 prosecuted cases out of 60,000 injuries).

2 Senate and Assembly Committees on Labor, Informational Meeting, 7/31/13: WisconsinEye at 3:18:30.

3 Senate and Assembly Committees on Labor, Informational Meeting, 7/31/13: WisconsinEye at 2:13:00.

Best Lawyers in America: Charlie & Tom Domer

Once again, Tom Domer and Charlie Domer have been recognized in Best Lawyers in America.   Both Charlie and Tom are listed in The Best Lawyers for “Worker’s Compensation Law-Claimants.”

Charlie and Tom, along with the entire team at Domer Law, strive daily to fight for the rights of injured workers and to maximize their benefits under Wisconsin law.  

Worker’s Compensation Legislative Changes in Budget Bill

The recently-passed Budget Bill in Wisconsin contains changes to the structure of Wisconsin’s nationally recognized worker’s compensation system.  We previously discussed the proposed changes in the following blog posts: Let’s Keep Wisconsin’s Worker’s Compensation System the Best in the Nation! and Wisconsin Legislative Update: Major Changes to Administration’s Proposed Break-Up.

After a lengthy Budget process, here’s where the dust settled for work comp:

WC Division staying at DWD: The good news is that Worker’s Compensation Division is not moving; the WC Division will remain with the Department of Workforce Development.  This includes all dispute resolution specialists, wage analysts, and administrative personnel.  It also appears that 6 administrative law judges (ALJs) will remain at the WC Division to deal with “non-litigated” cases.  Maintaining the WC Division at DWD is significant as it retains the culture, policies, and laws related to the WC Division.

  • The Governor signed off on the WC Division remaining at DWD.  When approving the Budget, Governor Walker did nothing to disrupt the structural core of the WC Division remaining at DWD.

Most Judges moving to new agency :The legislative Joint Finance Committee proposed and passed a compromise motion that 18 worker’s compensation ALJs move to the Division of Hearing & Appeals (DHA) in the Department of Administration (DOA) to handle litigated cases. The motion proposed that the transferred Judges devote a minimum of 80% of their time to worker’s compensation issues.  

  • Governor veto related to ALJ transfer.  Governor Walker signed off on the structural work comp changes in the Budget, along with using his powerful veto pen.  Walker specifically crossed-out the provision about 18 ALJs going to DOA and the provision regarding the “80% minimum” amount of time to be spent on worker’s compensation issues.  Thus, an unknown amount of ALJs are to go to DHA to handle “litigated” cases.
  • No limit on ALJ cross-training. With the Governor’s veto, there is no statutory requirement that the existing work comp ALJs handle only or primarily work comp matters.  The new agency could make use of the work comp ALJs to address a wide array of claims handled at the Department of Administration (e.g. probation/parole hearings).

The effective date of the agency transfer is January 1, 2016.

Next Steps:

The future is uncertain.  With the statutory provisions, we know that the Division of Hearings & Appeals at DOA will now handle and provide hearings in litigated worker’s compensation claims.  Presumably, the two agencies will address–as part of the transition–the appropriate policies, procedures, and responsibilities between DWD and DOA for handling non-litigated and litigated worker’s compensation claims.  Roadbumps are certain, but we hope that the DOA will continue to provide a high level of government service in administering litigated claims, scheduling hearings, and holding hearings.

We are hopefully the DOA would consider the following as part of any transition:

  • Utilize Judge expertise: Many larger court systems use specialized judges (e.g. family court, probate court) to increase efficiency and accuracy in decision-making.  Worker’s compensation similarly is a specialized area of the law, with over 100 years of cases, rules, and adminsitrative decisions.  As any insurance company can attest, many claims deal with millions of dollars.  Judges experienced in the area of worker’s compensation should continue to hear and decide these specialized disputes.
  • Maintain existing hearing scheduling system: The current system has an efficient and logical mechanism for scheduling worker’s compensation hearings.  Hearings are held at locations across the state, creating an efficiency and convenience for injured workers and employers alike.  The system also schedules a hearing only when all parties in a disputed claims are “ready” for a hearing, minimizing delays and createing efficient use of judicial time.  Adminsitrative hearings occur very quickly (e.g., 2-3 months) after the parties are ready for a hearing.  The totality of the current system looks like a governement efficiency model–we see limited reason to mess with a good set-up.
  • Ask for any assistance. With the new split-agency responsibilty for worker’s compensation, we’d urge the DOA to consult with the current practitioners in worker’s compensation.  The Division of Hearings & Appeals retains reponsibility for a wide variety of claims.  If there are questions about how to address or handle worker’s compensation issues, the experienced practitioners certainly can provide input.

We will continue to keep the worker’s compensation community informed as more information about the transition becomes clear. 

 

WILG Turns 20! Worker’s Injury Law And Advocacy Group 20th Anniversary

I joined WILG in its 1995 inaugural year. At those early conferences, my colleagues around the nation were battling workers’ comp “deform,” and engaged in political battles in their respective states, lobbying legislators on behalf of injured workers’ rights.

I thought I was relatively insulated in Wisconsin, the national “model” state for workers’ comp, with an Advisory Council composed of management and labor which each biennium produced an “agreed-upon” bill that was accepted by the legislature.

The Republican ascendancy in Wisconsin (Scott Walker as Governor, and both Assembly and Senate controlled by Republicans) has decided to ignore 100 years of progressive legislation and ignore the Advisory Council’s recommendations. This dangerous precedent will make workers’ comp more politicized, and threaten the stability of Wisconsin’s workers’ comp system. Wisconsin, like other states, will be part of a “race to the bottom” in workers’ rights and benefits.

WILG’s current President, Matt Belcher of Illinois, provided this summary of the state of workers’ comp as WILG celebrates its 20th anniversary:

”We have never been better positioned as a national organization to advocate on behalf of the families of injured workers.

Recent success in reviewing courts have highlighted nationally the unconstitutional danger posed to the community when injured workers lose access to effective legal representation, have capricious benefit limits imposed upon them, or are disabled due to unfair medical treatment bureaucracies.

WILG and its members have been at the fore of litigation battles where catastrophically injured workers have lost their savings, been forced onto welfare rolls and into Social Security Disability plans while simultaneously being denied access to the civil courthouse and the free exercise of their 7th amendment right to a jury trial. See Wade v. Scott Recycling (Virginia); Malcomson v. Liberty Northwest (Montana); Pilkington & Lee v. State of Oklahoma (Oklahoma); Padgett v. State of Florida (reversed on procedural grounds), Westphal v. City of St. Petersburg, and Castellanos v. Next Door Company (Florida).

The United States Department of Labor in coordination with OSHA have finally “discovered” that employee misclassification and wage theft are rampant, and that the cost-shifting externalization of care for injured workers is as poisonous as it is pervasive.

Perhaps most fundamentally, ProPublica, bolstered by the imprimatur and audience of NPR, has created a national conversation and awareness of the oppressed plight of injured workers with its feature The Demolition of Workers’ Compensation which exposed to the public domain the travesty and arbitrary injustice we slog through on a daily basis.

If we are uncritical we shall always find what we want. -Karl Popper

Continual, constructive self-assessment of our organizational efforts is indispensable to the accomplishment of our mission. Are we really doing the best job possible and are we succeeding to our complete potential?

Governors in the traditionally blue states of California and New York have signed away the long term financial security of millions of families of injured workers while Texas and Oklahoma have essentially jettisoned workers’ compensation benefits, allowing indifferent employers to Bail-Out of their responsibility to provide for the safety and security of working families. Further corporate front group Bail-Out initiatives are fermenting in the legislatures of Arkansas, Kansas, North Carolina, South Carolina, Tennessee and Wyoming.

In my view, the state workers’ compensation system is in its most dire situation in at least the last half-century. -Prof John F. Burton, Jr.

Professor Burton is clearly referencing only the perspective of the injured worker and not the immense wealth of the $85 billion insurance industry where insurance carriers now earn $6.20 in profits for every $100 of net premiums; and, private employers on average pay only 44 cents per hour for each employee to be provided with coverage.

Empirical evidence reliably demonstrates that each reduction in benefits to an injured workers’ family subsequent to “reform” has not translated into lower premiums for small business but primarily in greater profit for the self-insureds and the insurance industry. From 2007 to 2012, workers’ compensation benefits and costs per $100 of payroll were lower than at any time over the last three decades, while insurance company investment profits in 2011, 2012, and preliminarily for 2013, have topped 14% annually.

According to OSHA, workers’ compensation benefits now cover only 21% of workers’ compensation liabilities–shifting 79% of the true cost to others, including the injured workers’ family and taxpayers–while our firsthand knowledge demonstrates the inadequacy of current benefit levels and the injustice of the AMA Guides, ODG Treatment Guidelines, Primary Cause, Medical Formularies and the literal evaporation of effective vocational rehabilitation for those injured workers who have lost access to their prior occupation.

Therefore, my beloved brethren, be ye steadfast, unmovable, always abounding in the work of the Lord, for ye know that your labor is not in vain in the Lord. -1 Corinthians 15:58

I believe it will be the exponential participation of you, the existing member, which fosters our mission as much as the sheer addition of new members. The existential purpose of the organization must always be vigorous and exigent advocacy, not just growth and the collection plate. We must collect accomplishments, not only numbers.

Together we can do that, but we must have an active outreach program that communicates to the public, to the media and to state legislators the value of workers’ compensation and the cost of its failure. If business can focus-group a new Doritos flavor, I am confident we can use a similar approach identifying crux “reptile” talking points, plus distilling and building upon the points raised in the ProPublica series to focus our messaging.”

Employee or Independent Contractor?

Today’s post was shared by US Labor Department and comes from blog.dol.gov

The Wage and Hour Division is tackling employee misclassification because so much depends upon the answer to that question.

misclassification2-300x200

Imagine working as a drywall installer building houses as an employee one day, but the next day, while performing the same work on the same site for the same company, you’re told you are now considered an independent contractor. You didn’t suddenly open a business of your own. Nothing about your work changed. But now, you’re told that since you’re no longer an employee, you’re no longer eligible for overtime pay, unemployment insurance, worker’s compensation or a host of other benefits that come with employee status.

That really happened to a group of workers recently, who we discovered were owed back wages after conducting an investigation. And unfortunately, this situation is all too common − with terrible consequences. Misclassified employees are often denied access to the critical benefits and protections they are entitled. Misclassification also generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It forces workers to pay the entirety of their payroll (FICA) tax. It also tips the scales against all of the employers who play by the rules and undermines the economy.

Employer-Employee Relationships

In recent years, employers have increasingly contracted out or otherwise…

[Click here to see the rest of this post]

The “Gig Economy”

Very interesting NY Times piece on the “gig economy,” where millions of Americans work as contractors or temporary employees, along a corresponding increase in voters’ economic anxieties ahead of next year’s election.  The full article is here.

In our practice, we are seeing this type of work with greater frequency.  A large concern is whether these “temporary” or “contracted” employees are covered under a worker’s compensation policy.  To be a truly independent contractor under Wisconsin law, a stringent series of tests must be met about the ability to control one’s work, hours, equipment, etc.  If injured as a claimed independent contractor, a worker would be wise to consult with an attorney about whether they are actually an “employee”–not an independent contractor–and entitled to worker’s compensation benefits.

 

New Underwriting Workers’ Compensation Industry Rankings

Injured workers who have been denied benefits by Travelers, The Hartford, AIG, Liberty Mutual, and Berkshire Hathaway will be pleased to know those five insurance carriers are industry leaders in writing premiums for employers. Travelers has received $3,840,000,000 premium dollars (a 52.4% changes since 2009; The Hartford $3,012,000,000 (a 28% change since 2009). AIG and Liberty Mutual have lost market share but Berkshire Hathaway at $1,742,000,000 has increased its market share by 408.5%. Berkshire Hathaway and Travelers are among the insurance carriers that have posted the highest underwriting profits in the last five years.

Profits for workers’ compensation insurance carriers over the last five years have been significant, as has been reported in my prior blogs.  This news is small consolation for injured workers whose benefits continue to decline.

 

“Per Diem” Payments Latest Employer Fraud Issue in Workers’ Compensation

I have written often about the public’s perception that workers file fraudulent claims in workers’ compensation. The public perception (which ranges from one in ten to approximately one in three) is completely erroneous. The actual statistics indicate the incidence of employee fraud is as little as one-sixth of one percent, or two workers in ten thousand claims (based on the latest statistics available from the Wisconsin Worker’s Compensation Division).

Employer fraud, on the other hand, is rampant and grows daily into the billions of dollars. A recent report by the U.S. Department of Wage and Hour Division out of New Orleans indicated six Gulf Coast staffing agencies agreed to pay thousands of workers nearly $3.5 million in back wages after investigators found part of the workers’ wages were mislabeled as “per diem” payments as reimbursement for expenses they never incurred. The Labor Department indicated the recent investigations were part of an ongoing initiative aimed at ending an illegal and alarming trend of employers labeling part of employee wages as Per Diem payments, often to avoid overtime, payroll taxes, and other costs (such as workers’ compensation insurance premiums). The Department of Labor noted that companies break the law when they call part of a worker’s regular wages “per diem” expense reimbursement instead of wages. They do this in order to lower labor costs, avoid paying overtime, and avoid making payments toward federal and state taxes, workers’ compensation, unemployment insurance, and Social Security payments. These kinds of employers gain an unfair advantage over their competitors, some of whom are paying these taxes appropriately.