Avoid the perp, walk: workers' comp. premium fraud

“[A]s more workers’ comp fraud cases start creeping into the headlines, authorities are cracking down on the illegal practice, and construction companies need to be aware of their legal duties to avoid the potential consequences of fraud.”

“There are a few basic types of employer workers’ comp fraud, with diverse variations stemming from those few types. 

“One instance of fraud involves paying employees cash off the books so that the amount of payroll on which premiums are calculated is reduced, thereby reducing premiums.”

“Along those same lines are cases when employers intentionally misclassify employees as independent contractors.”

“Yet another common scheme is using shell companies, or companies set up for the sole purpose of paying employees without paying workers’ comp insurance and other benefits or taxes. This can be a company that the employer sets up himself or a third party who poses as a single-man operation with minimal insurance and minimal paperwork — just enough to avoid raising questions during an insurance premium audit.”

“Perhaps the strongest enforcement assets are contractors themselves.

‘”When you get burned on a job, and you didn’t get the award because somebody’s doing it for a price you know they can’t, (other employers) just turn them in,” [Mark] Sierra [construction insurance expert and consultant] said. “Then the state has people that go out on job sites and inspect them. So, yes, the competition definitely helps police it.”

[William] Canak [professor, Middle Tennessee State University]  added, “At a national level over the last decade, there’s been much greater recognition that there are a lot of people breaking the rules and that it negatively affects the proper functioning of the marketplace for employers and employees. It harms the community, it harms the workers and it harms law-abiding employers. So we’re seeing these initiatives roll out, and that’s good. It can’t all happen at once, but we’re making a lot of progress.”’

Construction Dive, January 26, 2016