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Workers’ Compensation Fraud Cases and Causes

If someone were to mention workers’ compensation fraud to you, what would be your first guess at who is generally responsible? Is it employees? That’s what a lot of people wrongly think.

According to a poll conducted on Claims Journal’s website, employee fraud was cited as the number one kind of workers’ compensation fraud. But the poll’s results actually reflect a major misperception.

According to Claims Journal, employer and healthcare workers’ compensation fraud are more common and cost the system much more. They are just less publicized by state insurance departments.

The North Carolina Workers’ Compensation Journal recently summarized the top 10 workers’ compensation cases for 2016 – and none of them involved fraud committed by employees.

What Is Workers’ Compensation?

Workers’ compensation is insurance designed to compensate employees who are hurt on the job. It pays for medical bills, therapy, rehabilitation, and some amount of time off work in some situations.

Some states require all employers to carry workers’ comp insurance, some require it based on the number of employees and the industry, and some do not require it at all. In exchange for receiving workers’ compensation benefits, employees are barred from suing their employer over the accident.

Carrying workers’ compensation insurance is not cheap for companies, and perhaps they have concerns about fraud, but carrying the insurance is a great way to manage their risk and avoid larger payouts. Find out if your North Carolina Employer is covered here.

Top 10 Workers’ Compensation Fraud Cases

According to the North Carolina Workers’ Compensation Journal, the top 10 cases of workers’ compensation fraud from 2016 resulted in a loss of $412 million. Nine out of the 10 cases were from 4 different states. One case involved 20 different states.

Many of these cases result from companies misclassifying employees as independent contractors. Fortunately for the employees, the courts often do not agree with the classifications. Another sizeable chunk of the top cases involve companies that overstate and overbill their employees’ or clients’ injuries, and from companies that evade payroll tax or misrepresent the number of people working for them.

Here are the top 10 workers’ compensation fraud cases from 2016, as highlighted by the North Carolina Workers’ Compensation Journal:

  1. FedEx Driver Lawsuits in 20 states.
    These cases came about because of FedEx classifying and treating their drivers as independent contractors. Because they were paid as contractors, FedEx was able to avoid paying a full array of benefits for their drivers. But a court determined that FedEx has to pay out $240 million to 12,000 drivers in 20 states.
  2. Healthcare Fraud 
    A business scheme for committing workers’ compensation fraud ended with seven people being charged with 107 felonies. The leader of the group owned a number of different businesses that committed fraud by exaggerating patient injuries and treatments and inflating billing to insurance companies. The businesses overbilled by around $12.4 million.
  3. Labor Department Inside Job
    A group of people created several businesses that fraudulently billed the federal workers’ compensation program $30 million. The ringleader’s niece worked for the Department of Labor in Dallas and tipped her family off when the billing came to the Department’s attention.
  4. Construction Company Fraudulent Payroll 
    A business owner used her construction LLC to process payroll for subcontractors, charging 5% for her services. Because of the way it was set up, the subcontractors were able to avoid paying payroll taxes and workers’ compensation for hundreds of employees.
  5. Construction Company Fraudulent Undocumented Workers Payroll
    A company set up by two men processed payments and checks for other companies, so the companies could pay their undocumented workers and avoid workers’ comp and payroll taxes.
  6. Insurance Company Agent Fraud 
    A business operator in California took $7.3 million from the company’s reserve accounts to use for personal investments. The company managed another company that sold workers’ comp insurance. Because of the theft, the company was unable to pay for 117 workers’ compensation claims.
  7. Contractor Fraud
    The owner of a contracting company underreported his payroll and committed insurance fraud. He was ordered to pay more than $5.4 million in restitution.
  8. Misclassification
    Construction companies misclassified most of their employees as independent contractors so they could avoid paying benefits like overtime, workers’ comp, payroll taxes, etc. The companies were ordered to pay more than $2.6 million in damages and penalties.
  9. Payroll Fraud
    Trucking company co-owners paid their drivers in cash to avoid reporting employees to their insurer and to avoid payroll taxes. They underreported their payroll by $4.7 million.
  10. Payroll Fraud
    A construction company owner misrepresented details about her company’s operations, number of employees and payroll when she applied for the workers’ compensation policy. This allowed her to avoid paying at least $1.8 million in workers’ compensation premiums.

None of these 10 cases involve employee fraud.

How Our Raleigh Law Firm Can Help

If you have been injured at work and you have been misclassified as an independent contractor, don’t give up just yet. You may have options for getting compensation for your injuries.

Many who work at a job where on-the-job injuries are common are incorrectly classified as independent contractors, when they are actually regular employees. If that is the case for you, you may be eligible for workers’ compensation.

You may also have other recourses for receiving compensation for your injuries, even if a court or insurance board does not consider you to be misclassified, so it is worth your peace of mind to talk to us today. We will walk you through your options and fight for you every step of the way to seek the compensation that you deserve.

About the Author

Robert C. Younce, JR
Chip is an attorney at Younce, Vtipil, Baznik & Banks and concentrates his law practice in personal injury and workers’ compensation law. He has tried over 100 workers’ comp cases to Opinion and Award and about a dozen personal injury jury trials to verdict. He has been board-certified by the North Carolina State Bar as a specialist in workers’ compensation law since 2001.

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