One of the most rampant kinds of workers' compensation fraud involves employers misclassifying workers as independent contractors so they can avoid carrying workers' compensation insurance for those employees.

The Salt Lake Tribute reported on a spike in the number of independent contractors with one employer in Utah, which officials say is a sure sign that the so-called contractors have been misclassified.

In the most recent data available, Utah saw a steep one-year jump in the number of independent contractors who have only one employer -- a typical indicator that the worker has been misclassified, Bill Starks, state director of unemployment insurance, said. Two years ago, 200,000 independent contractors reported only to one employer. Last year, the number swelled to 300,000.

Plenty of people are legally classified as independent contractors. These people, often also called W9 employees or freelancers, perform work for a variety of different employers or clients, set their own hours and derive their income from multiple sources.

But many companies assign the "independent contractor" designation to employees. In doing so, they avoid having to pay for costly workers' compensation coverage to these workers though they are legally obligated to provide this protection.

There's a pretty good rule of thumb for knowing a worker's contracting status: If he only works with one company, that business sets his hours and the company's success is tied to the worker's success, the company should probably consider him an employee, not an independent contractor. That means that company needs to issue a W-2 tax form -- and pay taxes, Social Security and unemployment and injury insurance on the employee's behalf, at a cost of about 30 cents more on the dollar.

A story out of California has us wondering if the state of the economy and the financial difficulties  that many businesses are going through will lead to more workers compensation fraud by employers?

Workers' compensation fraud is most commonly perpetrated by employees -- not by injured workers, as is the common perception. Two common tactics -- misclassifying employees job duties, treating employees as independent contractors or failing to carry workers' compensation insurance, as required by law. Misclassification of job duties helps companies keep their workers' comp insurance premiums lower, but it also means that employees may not be protected if they are injured on the job. Workers' comp fraud has a huge societal cost, as well.

Continue Reading

As an attorney who represents injured workers, I get so upset by the widespread public perception that most people who are collecting workers' compensation are "faking it" and somehow defrauding the system.

I know that's simply not true. The overwhelming majority of people who apply for workers' compensation benefits are injured and unable to work because of those injuries. But the media and the insurance companies have done a great job conducting smear campaigns that cast injured workers in a bad light. They've subverted the facts with anecdotes and a few damning videos and created the impression that workers' compensation fraud by employees is rampant. But in reality, only about 1 percent of all workers' compensatioin claims are found to be fraudulent.

However, fraud by employers and insurers is much more prevalent and costs billions of dollars annually. There's a human cost, too. Injured workers who are the victims of workers' compensation fraud often are unable to collect benefits that would make their lives easier and help them get the treatment they need.

Leonard Jernigan Jr., a fellow workers' comp attorney in North Carolna and the chairman of the fraud task force for the Workers Injury Law and Advocacy Group (WILG) has an interesting article in Workers First Watch about the prevalence -- and cost -- of employer and insurance fraud. In it, he provides the straight scoop on workers' compensation fraud.

Continue Reading

Injured people deserve fair and just compensation, especially if their injuries prevent them from working. Unfortunately, not everyone plays by the rules.

Willard Leech of Bellingham, Wash., learned that the hard way. He got jail time for illegally collecting workers' compensation for a low-back injury that supposedly prevented him from working.

Continue Reading

For any state considering workers' compensation reform, California should be a cautionary tale.

After his election, Governor "Arnold" began working to reform the state's WC system, promising that changes would save businesses millions, if not billions, in reduced premiums. But years later, those savings still have not been realized, and the reforms have been devastating for injured workers. The only winners from workers' comp reform in California? The insurance companies.

Recently, an injured worker who had been falsely accused of workers' compensation fraud after filing a claim received some measure of justice.

Continue Reading

Today we’re highlighting another case of alleged workers’ compensation fraud committed by an employer, this time in Riverside, Calif..

The owners of  Banning Construction Company (also known as TF Ventures and All Service, Inc),  are charged with an on-going scheme dating back to 2001 to defraud the state.

Carter Lee Pendergrass, 56, his son Joshua, 25, and their business associates, Timothy Cassidy and his wife, Karen, both 51, are each facing dozens of counts of insurance fraud, money laundering and filing false income tax statements, according to court documents. The charges involve collected losses over $6 million which include unpaid payroll taxes and lost money on insurance premiums.

Continue Reading

An alarming Federal District Court decision from New Jersey:

A group of wokers who sought workers' compensation benefits after their factory closed were ordered to pay more than $2.2 million to their former employer.

The company levied racketeering charges against the employees and accused them of conspiring to defraud the company by making false injury claims.  The saddest part is that the workers, in part because they may not have understood what was happening, did not contest the lawsuit.  And so, without any contested hearing on the merits of the case, U.S. District Judge Stanley Chesler signed a default judment against the workers. 

Judge Chesler ordered the employees to repay the company's attorney fees, costs, compensatory damages and even workers' compensation awards that had been paid to two former factory workers.

The judgment is alarming, not least because it is a default judgment and the viewpoints and positions of the workers were not heard.  I've got to agree with others workers' rights attorneys who told the Star-Ledger newspaper in New Jersey that the case "signals a 'frightening precedent' that can be used to quell legitimate employee injury claims" and may make attorneys hesitant to take on workers' cases.

The Michigan-based company involved had 12.8 billion in sales last year, and obviously had plenty of money to hire competent attorneys to bring this federal case.  The workers, many of whom had salaries of $16,000 or $17,000 a year, would probably have had trouble paying attorneys to defend them, had they realized the necessity of responding to the suit. 

Read more about the case here.   

Workers' compensation for undocumented workers is a hot button issue right now.

Stats show that Latino workers are injured on the job at a disproportionate rate.

The real tragedy occurs when an undocumented worker is injured. Many employers try to deny these employees workers' compensation benefits, and they're often successful in doing so.

According to an article from McClatchy Newspapers:

"In one national study, university researchers surveyed 2,660 day laborers, most of them working illegally. One in five said he'd suffered a work injury. Among those who were hurt in the last year, 54 percent said they didn't receive the medical care they needed, and only 6 percent got workers' comp benefits."

But the law is clear.  Undocumented workers, even if they are working in the U.S. illegally are entitled to workers' compensation benefits -- lost wages and medical treatment.

From the same article:

"Employers in at least 20 states, arguing that their employees shouldn't receive injury benefits because they're illegal immigrants, have fought and lost in courts and review boards. Among those employees were a California laborer who hurt his back lifting sacks of coffee, an Arizona auto mechanic who was hit in the eye by flying debris, a Maryland carpenter who cut his hand on a saw, and a North Carolina construction worker who suffered a brain injury when he fell 30 feet onto a concrete floor."

I encourage you to read the entire McClatchy article to learn more about how some workers are being denied benefits to which they are lawfully entitled.

A new study  by the Fiscal Policy Institute (FPI) illustrates just how costly employer workers’ compensation fraud can be.

In New York state, the cost is a staggering $1 billion every year – the result of companies that either don’t pay their workers compensation insurance premiums or underpay because they lie about the size of their work force. Honest companies end up paying higher premiums as a result, and injured workers are forced to go without the workers' compensation benefits that they are entitled to.

Continue Reading

A supposedly injured worker is caught on hidden-camera video doing strenuous work in his backyard.

Footage such as this, shown on NBC’s Dateline, makes for compelling television news. But it also perpetuates the myth that workers’ compensation fraud is rampant.

But it’s not.

Continue Reading