Workers’ compensation fraud is simply another form of insurance fraud—the purposeful exploitation of the benefit system through deception and deceit. It may come as a surprise that workers’ compensation fraud does not just entail employees manufacturing or manipulating injuries or sickness for personal gain, but actually more often consists of employers strategically circumventing rules and regulations to avoid greater liabilities.
What does employer workers’ compensation fraud look like?
Misclassifying employment status
Georgia law requires business owners to carry workers’ compensation insurance if they have three or more employees. Even if employers do meet that threshold, and therefore carry workers’ compensation insurance, only workers classified as employees are entitled to coverage. Employers misclassify employees as independent contractors (and in some cases, owners) to avoid payments.
In 2015, the Economic Policy Institute reported that between 10–20 percent of employers misclassify at least one employee as an independent contractor. According to a 2020 report by the National Employment Law Project, “rates are disproportionately high in certain industries, such as construction, real estate, home care, trucking, janitorial, hi-tech, and the rapidly growing app-based economy.”
Underreporting or not reporting payroll
In some instances, employers incorrectly calculate the company’s average weekly wage, pay wages off the books, or simply avoid reporting wages to lessen payroll costs. Not only does this harm workers, but also defrauds municipal governments that are supported by payroll taxes.
Forming shell companies
One of the trickiest moves employers make to avoid paying workers’ compensation premiums is forming shell companies. These are fake companies which look legitimate on paper, even down to having workers’ compensation coverage, but which operate illegally and rely on off-the-book employee labor.
Denying valid workers’ compensation claims
Employers defraud employees of benefits by outright denying workers’ compensation claims, assuming the worker will not follow up on the matter.
Retaliating against the injured employee
Employers utilize scare tactics to discourage employees from reporting injuries and requesting care. If an employee is involved in an accident, files a workers’ compensation claim, and is then laid off by the employer, this sets an example to the rest of the team: do not claim workers’ compensation coverage. Retaliation against employees is illegal, but difficult to prove. Employers may lie and cite other reasons for termination.
In Georgia, employers who commit workers’ compensation fraud face serious penalties which include:
- $500–$5,000 fines for each violation
- Misdemeanor charges
- Up to a year in jail and fines up to $10,000
Employers who commit fraud benefit enormously by not having to pay the premiums, but ultimately do great harm to individuals injured and in need of workers’ compensation. If you suspect your employer is engaging in fraudulent practices to avoid providing workers’ compensation coverage, contact an attorney. With over 20 years of experience in workers’ compensation, Julie Poirier of Poirier Law Firm can help you get the care, consideration, and compensation you deserve.