Workers’ Compensation Fraud

Compensation, Contrary to what most people believe, workers compensation fraud is more than just exaggerating the medical condition. It’s a violation of an insurance program that provides a large number of benefits to employees who were harmed or damaged on the workplace. This program involves following benefits: medical, temporary and total ones; permanent, partial ones and death benefits. It has to be mentioned that the injured employee will receive all the benefits mentioned above, in the exchange for not bringing a civil action against the employer (except the cases of intentional acts).

Returning to the workers’ compensation fraud, it should be noted that the fight against cheaters and malingerers recently forced the insurance industry initiate a workers’ compensation reform that involves a profitable cost-cutting campaign in order to resist the abuse of the system.


Workers’ compensation - a category of insurance that provides employee protection from any kind of harm in the workplace that supplies wage replacement, medical benefits, vocational rehabilitation, and other expenses in the process of healing, to the workers that have been injured.

Worker’s compensation fraud appears when someone makes a misrepresentation about their job status, or health state in order to receive compensation benefits or to avoid responsibility under the law. It appears in both private and public sectors, generally committed by doctors, lawyers, employers, insurance company employees and claimants. This major issue costs billions of dollars annually.


There are a lot of forms of workers’ compensation fraud, and each of them has its particularities. One of the most popular are: faking injuries - employees fake wounds, harm and damage that theoretically occurred in the workplace, in order to receive compensation that will cover the medical bills; inflating injuries – appears when the worker lies about the amount of damage, in order to increase the quantity of the compensation, or to stay at home for a longer period; remote injury – filing a claim for an injury that didn’t occur on the job; old injury - an employee claims that an old injury occurred recently on the workplace; failure to disclose – when an employee knowingly or unknowingly makes a false statement or representation about their harm damage; misrepresenting previous trauma or treatment; malingering (goldbricking)occurs when the employee stays at home for a longer period, pretending he is still ill; An employer avoids a higher insurance risk by transferring employees the new business entity rated as a lower risk.


Workers-Compensation-Law-Book-Defending-he-EmployersThe Workers’ Compensation Program was established in 1991, making Workers’ Compensation fraud – a felony which requires investigation and prosecution activities. It is illegal for an employer not to purchase workers’ compensation insurance. Committing this felony can be punished in two ways:

  1. Civil penalties: Up to $1,000 for the first 20 days, and up to $1,000 for each 10 days thereafter.
  2. If successfully prosecuted as an indictable offense – up to 18 months jail, a $10,000 fine.

Besides, both workers and business workers assume supplementary risks while committing workers’ comp fraud. When you get caught, in addition to fines and jail time come lost jobs, lost business, ruined careers, criminal records and a destroyed reputation.


Note: Do not exaggerate in suspecting your employees or your boss, but if more than two criteria comply, consider taking measures. Moreover, you should start maintaining detailed records of the policyholder interactions (e-mails included). Be careful with all the warning signs and don’t hesitate to work with anti-fraud programs. In case that you suspect a workers’ compensation fraud, inform the carrier’s special investigation or fraud investigation unit. Here is a typical form you should fill in order to report a complaint.

Don’t confuse an intentional misrepresentation (with a clear intention of obtaining or denying benefits) and an inadvertent/accidental misstatement. The last one is not a fraud and can’t be prosecuted.

For the employees:

  1. Injury that appeared early Monday (it might occur during the weekend, and the employee tries to obtain easy money this way);
  2. Injury that appeared late Friday (might be imitated in order to make a weekend longer);
  3. Injury that has no witness other than the employee him/herself;
  4. Injury didn’t occur on, or has no relation to the job;
  5. Injury that is not typical with the activity of the workplace;
  6. Employee’s history of the workers’ compensation requests (you may find a precedent);
  7. Employment change. The reported accident occurs immediately before or after a strike, job termination, end of a big project, conclusion of seasonal work.
  8. Injury occurred before a holiday;
  9. Late reporting;
  10. Treatment is refused;
  11. The employee has a history of frequently changing physicians, jobs and addresses;
  12. Injury appeared in a location where the employee is not supposed to work;
  13. Evidence of employee working elsewhere while drawing benefits,etc.

For the employers:

  1. Under-reporting payroll (when a policyholder doesn’t accurately present their entire workforce to the insurance company)
  2. Misclassification of employees (when a high-risk worker is classified as a person on a low-risk position)
  3. Misclassifications of employees as independent contractors;
  4. Misrepresenting past loss experience;
  5. Experience modification evasion (this term is used when a closing company is trying to re-emerge on paper as a completely different thing in order to obtain a lower experience modification factor);
  6. The actual physical location differs from the one reported (or the business address is just a mail drop);
  7. Much larger premiums paid for the previous year’s policy;
  8. Unusual ratio of clerical to non-clerical staff for the type of business;
  9. The business avoids audits or has never been audited.
  10. A large number of certificates of insurance are emitted on a small policy, etc.

For health care providers:

  1. Billing for treatment of patients who were never treated;
  2. Billing for exams of patients who were never examined;
  3. Billing first exams as following ones in order to be highly paid for them;
  4. Bills or explanations of benefits that seem unnecessary or fictitious;
  5. Attorney relationship with a health care provider (occurs with the intention to get bigger profit from the deal);
  6. An unreasonable amount of billable hours per day that an attorney or a healthcare provider notes;
  7. Misrepresentation of the true code for the medical treatment provided;
  8. Duplicate billing, and other less known examples.


The fraud image is usually distorted from the reality. Studies show that only 1 to 2 percent of workers’ compensation claims are fraudulent. However, there are numerous schemes used by both workers and employees in order to commit fraud. One scheme involves hiring and paying worker off the books, the other includes misclassifying employees in high-risk jobs as holding lower-risk jobs, the third one  involves some businesses illegally try to avoid full state-required workers’ compensation premiums. These schemes stole $489 million in worker expensive premiums, taxes, and other expenses.

  • From the beginning of 2000 the number of employees misclassified by employers increased from 106,000 workers to more than 150,000.
  • Every $1 invested in workers’ compensation anti-fraud policy has returned $6.17, or total $260.3 million


Worker's CompensationIn case that you got injured you should notify your employer (supervisor, personnel office, or anyone in authority at your workplace) as soon as possible. Also, if you need medical treatment you should request it immediately.

In addition:

The motives of committing this type of crime are generally correlated with free money. Other motives might be free vacation or the danger taking place on the second job or at the opened aside business and the subsequent claiming that the injury occurred on the current workplace. From the employers’ perspective, this crime occurs in order to illegally reduce the workers comp premiums. It takes a lot of effort, time and financial expertise to expose and convict in court dishonest business owners. A well-spread phenomenon is dishonest doctors and lawyers interconnected to scam workers’ compensation insurance. This type of alliance can get millions of dollars a year using inflated injuries, phantom injuries, fake clinics, bogus lawsuits, illegal kickbacks, etc.

Whatever the motivation to commit a fraud is, we all pay a price for it. Some of the serious consequences of a workers’ compensation fraud might be: weakened business, taxpayer rip-off, employees working harder, lost jobs, higher prices, higher premiums, and endangered workers. In order to combat this problem, both employees and employers must follow following instructions: workers should contact their supervisor or insurance company hotline in case they suspect something, and watch for medical mills. In their turn employers should report accidents, build partnerships with employees, check job applicants carefully, report fraud, apply zero tolerance policy, alert the insurer if the need arises, provide anti-fraud policies and procedures, know the warning signs, verify the insurer itself.

Note: In case that you, or someone that you care about have legal complications with workers’ compensation, don’t hesitate to ask for professional help. All you have to do is go to Legal Bistro, create an account and describe your case.

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