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Workers’ Comp Fraud
If your employees become ill from their job or get injured at work, you could be responsible for paying the medical expenses. And if they sue you and your business, you may need to pay the legal costs out of pocket. Workers’ compensation insurance provides benefits to your employees if they get hurt or sick because of their work. Workers’ comp can help cover the medical costs for sick or injured workers. It can also help replace some of an employee’s lost wages if the work-related injury or illness causes them to miss work. Because of this, workers’ comp fraud is enticing to criminals.
Workers’ comp fraud can be committed by employers, employees and even health care providers. Fraud schemes can be simple or complex in nature. Workers’ comp fraud can lead to higher insurance premiums and penalties. So it’s important to know how to identify it to protect your business.
More About Workers’ Compensation Fraud
Workers’ comp fraud involves someone lying to benefit financially. This could include an employer, employee or health care provider. Here are some quick examples of workers’ compensation insurance fraud:
- An employer misclassifies employees to avoid having to pay a workers’ compensation insurance premium.
- An employee fakes a job injury or illness and uses his or her workers’ compensation benefits to receive a payment for medical costs.
- A hospital surgeon bills for a service that was not performed.
Workers’ comp can be a complex topic for business owners and employees. One step you can take to prevent employees from committing fraud is to help them understand what workers’ compensation insurance is. Help them understand it’s an employee benefit. If they know how and what workers’ comp is, it can limit the possibilities of fraud.
Examples of Workers’ Comp Fraud
Employees and Workers’ Compensation Fraud
Employees can commit workers’ comp fraud in a variety of ways. Whether it’s lying about an injury or illness, making it up entirely or submitting false claims, there are numerous ways employees can commit fraud.
- An employee reports he was injured at work after lifting a heavy box. He submits a workers’ compensation claim. He receives workers’ comp benefits, but the injury never occurred.
- An employee reports she became ill after working with chemicals at work. In reality, her illness was not caused by her work.
- An employee suffers a repetitive injury at work. When reporting the injury, he exaggerates and makes it seem worse than it is.
Employers and Workers’ Compensation Fraud
Employers can commit workers’ compensation fraud. So you need to be careful with how you handle coverage.
There are different workers’ compensation laws by state. Typically, most states require coverage if you have employees. Employers may classify workers as temporary employees or contractors in an attempt to have lower workers’ compensation premiums. This counts as fraud. Proper classification of employees is necessary and important. If you’re found to have misclassified your employees, you could be liable for penalties.
In addition, an employer can commit fraud by providing an inaccurate number of employees. This may happen because the number of employees impacts the cost of workers’ compensation.
An employer can also commit fraud by not being truthful about job safety. Let’s say an employer tells an insurance company or agent they put a work safety program in place. As a result, the employer workers’ compensation cost is lower. But it turns out the workplace safety program is not in place.
If you don’t purchase workers’ compensation insurance and your business is in a state that requires it, this could constitute as fraud. Workers’ comp from The Hartford helps provide your employees with important benefits if they get hurt or sick because of their job. We’re here to answer your workers’ comp questions and help protect your business and employees safe.
Ways to Identify Workers’ Compensation Fraud
Employers should be aware and able to identify workers’ compensation fraud. Workers’ comp fraud costs employers $30 billion annually.1 Be aware that workers’ compensation audits can also reveal fraudulent actions, which can lead to penalties, fines or a policy cancellation. Here are a few ways that could help you recognize if an employee is committing fraud:
- If an employee is injured or sick on the job, they have to report it to a supervisor and state what happened. If the employee’s story doesn’t add up or changes numerous times, that should be a red flag for you.
- If your business is equipped with security cameras, you can review footage to determine what happened.
- Speak to witnesses or the employee’s coworkers to vet his or her story. If the witnesses tell you something that contradicts the employee’s report, that should be a cause for concern.
To help reduce the risk of workers’ comp fraud, explain to new employees the process of reporting an injury or illness. Tell them the timelines they need to be aware of when filing claims. Consider giving new and existing employees training on your business’s workers’ comp policies, including a return-to-work program. The goal is to make sure they know what to do if they get sick or hurt from their job.
How Do I Handle Workers’ Comp Fraud?
If you suspect there may be workers’ comp fraud at your business, you should report it. If you believe an employee submitted a suspicious claim, reporting it can help protect you and your business.
- Provide your state with information on the name and address of the person you’re reporting.
- Be sure to include information about the incident. Explain why you believe the person may be committing workers’ comp fraud.
- Provide any relevant additional information and details about the person.
After reporting workers’ comp fraud, a state agency or official typically takes over and investigates.
Penalties for Workers’ Comp Fraud
If an employer, employee or health care provider commits workers’ comp fraud, they are subject to penalties. These penalties include fines and even jail time. The amount of fines and severity of jail time varies from case to case.
For example, a business owner in Auburn, New York, was sentenced to one to three years in jail after a workers’ comp investigation found he received more than $83,000 in benefits he wasn’t eligible for.2 The investigation also revealed the business owner did not provide workers’ comp coverage to his employees.
Committing workers’ compensation fraud is a serious offense. It can also have significant financial consequences for your business. Make sure you know your state’s coverage requirements. And be sure you’re able to recognize the signs of workers’ comp fraud. We’re here to help you protect your business and employees. Get a quote today online for workers’ comp insurance – it’s fast and easy. You can also call 855-829-1683 to speak to one of our specialists.
This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. The Hartford shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.