Tag Archives: employer fraud

Employers Who Cheat on Workers’ Compensation Coverage

Employers who fail to cover their workers for workers’ compensation, or who mischaracterize their employees as “Independent Contractors” cheat the entire workers’ compensation system. They cheat both the workers who remain uncovered and other employers who appropriately cover their workers. 

An effective tool for combating this employer fraud has been used in North Carolina. The North Carolina Industrial Commission used computer data to collect nearly a million dollars in penalties from employers with no workers’ compensation. The penalty revenue is used in North Carolina to maintain public schools.

The Commission’s Compliance and Fraud Investigative Division staff used a new tool, the Non-Compliant Employer Targeting System (NETS) to identify employers who are required by law to maintain a valid workers’ compensation insurance policy but have failed to do so. North Carolina Industrial Commission Chairman Andrew Heath noted “Unlawful employers that fail to provide workers’ compensation insurance coverage are a drain on North Carolina’s legitimate businesses, health care providers, and taxpayers.” He noted “unethical and illegitimate business owners will find no safe harbor here in North Carolina.”

States should focus on employer fraud, rather than spinning their wheels on virtually non-existent employee fraud. Much fanfare (primarily fueled by insurance carrier advertisements) accompanied the enactment 20 years ago of a fraudulent claims reporting provision in Wisconsin’s Workers’ Compensation Act. Since 1994 the Act requires insurers to report suspected employee fraud to the Department of Workforce Development on their own initiative. After reviewing the results of the insurer’s investigation, the Department refers cases to local District Attorneys for prosecution if there is a reasonable basis to believe the case involves insurance fraud. The Department’s published multi-year study of such claims concludes that the public perception of workers’ compensation employee fraud is extremely exaggerated – less one in ten thousand injuries.

Efforts at uncovering and penalizing employer fraud should be undertaken in all states.

Roofing Company Owner Faces Felony Charge for Not Paying Workers’ Comp

Today’s post comes from guest author Kit Case, from Causey Law Firm.

This is a good reminder that worker’s compensation “fraud” applies to employer behavior too.

A Mason County, WA roofing contractor faces a criminal charge for allegedly failing to provide workers’ compensation insurance for his employees while they were on the job.

The Washington State Attorney General’s office has charged Peter Daniel Yeaman, 55, with unregistered contracting and doing business when his workers’ comp coverage was revoked.

The latter charge is a felony with a penalty of up to five years in prison and a $10,000 fine. Yeaman is scheduled for arraignment in Kitsap County Superior Court today, July 23.

The case resulted from a Department of Labor & Industries (L&I) investigation into Yeaman and his company, Southgate Roofing, of Belfair.

 

Unfair business advantage

“When contractors skip out on workers’ comp, it’s illegal and it’s incredibly unfair to legitimate contractors who pay their fair share and get underbid by these lawbreakers,” said Annette Taylor, deputy assistant director of L&I’s Fraud Prevention & Labor Standards. 

“Workers’ comp premiums for roofers are among the highest in building construction and the trades, based largely on the safety risks those workers face.”

State law requires employers to provide their employees with workers’ compensation insurance. The coverage provides medical care and other financial support if employees are injured on the job.

Construction contractors also must register with L&I. The department confirms they have liability insurance and a bond and that, if they employ workers, they’ve paid their workers’ comp premiums.

 

At least six roofing employees

L&I suspended Southgate Roofing’s contractor registration in November 2012 for failing to pay workers’ comp premiums, and later officially revoked the company’s workers’ comp coverage.

Nonetheless, according to the charges, L&I found two consumers in Silverdale who had work done by the company in May 2014 and in August 2014.

During the August job, six workers told an L&I inspector they worked for Southgate Roofing. Yeaman himself told the inspector he needed to pay a bill before he could register as a contractor, charging papers said.

 

Eight previous infractions

In addition, the charges say that between October 2013 and September 2014, the company bought roofing materials numerous times from a Bremerton supplier and made numerous trips to a Bremerton disposal site.

Apart from the criminal charges, L&I has cited Yeaman with six unregistered contracting and two permit-related infractions since 2013, and several safety violations in 2013. L&I currently lists him as ineligible to bid or work on public works projects. He owes the department more than $28,000 for the unpaid fines and more than $131,000 for unpaid workers’ comp premiums, penalties and interest.

Photo credit: davidwilson1949 / Foter / CC BY 

“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.

The Persisting Myth of Employee Worker’s Compensation Fraud

Our colleague Leonard Jernigan has compiled a list of 2012’s top 10 workers’ compensation employer insurance frauds.

It’s Holiday Season. At every gathering or party when I indicate I represent injured workers, I am asked “Aren’t most of your clients frauds?” I respond, as patiently as I can, that the actual hard data in Wisconsin, based upon years of study, indicates less than six tenths of one percent of workers have some potential element of fraud in their claims.  I further explain that the level of employer fraud makes this tiny percentage of employee fraud pale by comparison. I further note that the level of employer fraud uncovered on a daily basis is enormous.  

This routinely raises an eyebrow until the actual numbers are revealed. The questioner’s interest is also piqued when I indicate the costs of medical care and disability shifted to taxpayers through inappropriate cost shifting to Social Security, Medicare and Medicaid makes us all pay the price for employer worker’s compensation cheaters.

My friend and colleague Leonard Jernigan in North Carolina has led the difficult task of revealing these employer fraud cases and has posted the Top Ten 2012 Worker’s Comp Fraud Cases.  In 2012, the Top 10 cases alone cost nearly $100 million to the worker’s compensation system.

Included in the list are the following:

  • Florida employer creating ten “shell” companies, funneling $70 million in undeclared and undetected payroll for construction operations to avoid paying the cost of worker’s compensation coverage, leaving employees at risk.
  • Ohio companies Continue reading

Man Convicted in 2.7 Million Worker’s Comp Fraud—Not An Injured Worker

Employer fraud is far more common than worker fraud.

I read this headline in the Insurance Journal while ago. My assumption, even though I represent injured workers, was that the headline concerned an employee who had defrauded an insurance company. Why did I immediately jump to that conclusion? Because most of the headlines screaming about worker’s compensation fraud are headlines aimed at employees who are defrauding the system, even though the vast majority of worker’s compensation fraud involves employers.

The $2.7 million fraud case involved a North Carolina man, Carl Dalmus Fuller, who scammed a Florida based employment services company into purchasing a fake worker’s compensation policy. The employment company’s records showed it paid Fuller over $2.7million in premiums. The insurance company listed had no agent, and the business address was Fuller’s post office box.

Most of the headlines screaming about worker’s compensation fraud are aimed at employees who are defrauding the system, even though the vast majority of worker’s compensation fraud involves employers.

Fraud cases like this involving substantial seven-figure numbers involve insurance companies or employers who mischaracterize actual employees as Independent Contractors, miscategorize Continue reading

Wisconsin Workers Do Not Fake Injuries

I’m tired (and angry) when I read or hear news stories about alleged employee fraud in workers’ compensation cases. At cocktail parties, seminars, and social gatherings, when I say I represent injured workers, a common retort is “How many are faking their claims?” I respond, as calmly as I can, that in my experience with thousands of workers over 35 years, only a handful have not been straightforward, and that, compared to instances of employer fraud (not insuring workers, calling them “independent contractors”, telling them to file injury claims under group health insurance, etc., etc.) employee fraud is a drop in the bucket.

The Department’s six year study of such claims concluded that the public perception of workers’ compensation fraud is exaggerated. The documented level of workers’ compensation fraud is minimal.

Much fanfare (primarily fueled by insurance carrier advertisements) accompanied the mid-1990’s enactment of a fraudulent claims reporting provision in the Wisconsin Worker’s Compensation Act. Since then the statute has required insurers to report suspected fraud to the Department of Workforce Development on their own initiative and, at the request of the Department, to investigate and report on cases of alleged fraud reported to the Department by the general public.

In over 6 years, district attorneys initiated prosecution in 17 cases in Wisconsin, obtaining conviction in 14. 

Most fraud allegations are made anonymously, by telephone (608-261-8486), and from people who identify themselves as former friends or spouses, relatives, co-workers, or neighbors of the person alleged to be committing fraud. According to the Department summary report, “those allegations usually don’t pan out.” Continue reading