Studies indicate that employee worker’s compensation fraud is minimal
I’ve said several times in this blog that I view most news through the prism of a lawyer represented injured workers. This morning’s headline noted “Democrats Reject Fraud Tales – Say Make Voting Easier”. Republicans have focused on the voter fraud issue in an attempt to limit voting from those who they assume will vote against them (employees, poor people, people of color). Republicans have resisted efforts at mandatory early voting periods and same day registration to make it easier to cast ballots. Their argument is eerily similar to the scare tactics employed by employers and insurers in worker’s compensation fraud.
Studies indicate voter fraud throughout the United States is virtually absent.
However, statistic belie these claims. Studies indicate voter fraud throughout the United States is virtually absent. In the same manner, employers and insurers routinely harp on the issue of employee worker’s compensation fraud (alleged malingering, etc.) and studies also indicate that employee worker’s compensation fraud is minimal at best (in Wisconsin studies suggest less than one-sixth of one percent). On the other hand, employer fraud (misreporting classifications of employees, classifying employees as Independent Contractors rather than employees) is rampant and costs the industry millions of dollars.
North Carolina Governor Bev Perdue Signed Executive Order 125
Today’s post comes from guest author Leonard Jernigan from The Jernigan Law Firm.
“Misclassification” is a poorly chosen word to describe fraudulent conduct by employers who misclassify the status of their employees. For example, a roofing company may have 30 roofers doing the actual work but these workers are classified as “independent contractors” instead of employees. Why would they do that? At the end of the year these workers are sent a 1099 tax form that reports the wages paid, but the employer does not make any deductions for Medicare or unemployment, and doesn’t pay for workers’ compensation insurance. If you have a roofing company and you properly classify your employees, you are at a competitive disadvantage in bidding on jobs. Honest businesses are hurt by misclassification, and taxpayers are hurt because they pick up medical bills and other expenses created when one of these “independent contractors” gets hurt.
Another form of misclassification is when a construction company with 85 employees reports to its workers’ compensation insurance company that 75 of these people are staff workers, which results in a significantly reduced premium. Obviously, a construction worker is at greater risk of injury than an office worker. Again, the honest company who accurately reports the status of its employees is at a competitive disadvantage with the dishonest employer.
New York, New Jersey, Massachusetts, Virginia, Michigan, Florida, California, Texas and the vast majority of states across the country have been looking into this issue for several years and they have been aggressively prosecuting dishonest employers who try to game the system. North Carolina has finally joined these states. On August 22, 2012, Governor Beverly Perdue issued Executive Order 125, which created a task force to study this issue and try to get different agencies to communicate with each other and share information to identify employers who are failing to pay employee taxes. Hopefully, this task force will figure out how to enforce existing law. This blog will follow the progress of this task force. Stay tuned.