When many people think of workers' comp fraud, the image of employees faking injuries comes to mind. However, some employers also participate in fraudulent schemes to either lower their workers' comp premiums or avoid getting the insurance altogether.
To combat this, authorities in south Florida have stepped up their investigatory efforts, particularly focusing on the construction industry where workers' comp fraud is prevalent. Here's more information about the government's efforts and tips for determining if your employer is engaging in fraud.
Florida's Crackdown on Workers' Comp Fraud
Workers' compensation fraud is perpetuated many different ways in the construction industry, but the most concerning is the increase in coverage fraud. This is when one person (or group of individuals) set up a fake or shell corporation, buy the minimum amount of workers' compensation insurance and then sell the "right" to use the company's name and insurance papers to subcontractors. The fake company gets cash and the subcontractor avoids purchasing real insurance.
This is problematic for a number of reasons. First, employees typically will not be covered if they are hurt on the job. Second, this type of fraud gives the subcontractor an unfair advantage over other companies that comply with the law and purchase workers' comp insurance as required. Lastly, coverage and other types of workers' comp fraud can result in higher premiums for everyone as the insurance company raises rates to cover their losses as well as lost tax revenue for the state.
Florida Department of Financial Services investigators have been granted the authority to make unannounced visits to construction sites, demand records, question employees, and stop work altogether in an effort to determine whether the construction company is engaging in workers' compensation fraud. Coupled with other strategies, the aggressive investigations have resulted in a 17 percent increase in fraud prosecution and 29 percent increase in arrests.
Still, the problem does not appear to be abating, and it's not limited to Florida. A 2004 study by Cornell University found 39,500 employers misclassify employees every year. A 2007 study by the University of California at Berkeley found employers in California use creative accounting to short insurance companies up to $3.8 bill every year in premiums.
Preventing Workers' Comp Fraud
If your employer doesn't have workers' comp insurance or perpetuating insurance fraud, your chances of receiving compensation for injuries sustained in an on-the-job accident drop significantly. Either you won't be covered at all or the insurance company may reject your claim because of the employer's fraudulent actions.
Protecting yourself from workers' comp fraud means being aware of what's going on at your company and reporting suspected fraud to the appropriate authorities who can force your employer to comply with the law. Some signs of possible workers' comp fraud include:
- Being paid in cash—The employer will pay in cash rather than by traceable methods like checks or direct deposit. Doing this makes it easier for the person to hide the number of employees the company has, thus receiving a lower premium. Another reason for the cash payment is the owner may write checks in the name of a shell company, cash the checks at a non-bank money service facility and distribute the funds to hide the fact that the company doesn't have real workers' comp insurance.
- Misclassification—Since companies don't have to buy workers' compensation for independent contractors, your employer misclassifies you as an independent contractor rather than an employee. A red flag for this is your employer doesn't collect federal, state, and/or social security taxes on your behalf. The IRS does provide information about how to determine who's an independent contractor and who's an employee. If you fit the description of an employee but your company has you classified as an independent contractor, there may be some fraud occurring.
- Cash negotiation—The employer tries to dissuade you from filing a claim by offering a cash settlement or stating a cash settlement is the only option available.
- Lying about coverage—The employer may lie and say the accident or injury is not covered by workers' compensation.
Employers are required to provide information about their workers' comp insurance when requested. Many states also have online tools that let employees verify whether their employers have workers' comp insurance. If your employer's insurance papers seem suspicious or there is other evidence of fraud, file a report with the state agency responsible for handling workers' comp fraud.
For more information about workers' comp fraud or assistance with litigating a workers' comp claim, contact an attorney through resources like http://www.hardeeandhardee.com.