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09 Mar

The Myths of Employee & Employer Fraud

Most times when people talk about fraud in workers’ compensation cases, they mean employee fraud. It’s a common misconception that most work injuries are faked or exaggerated. Do those cases occur? Yes, but just not to the frequency that most people assume.

In the 2017/2018 fiscal year, the Florida Bureau of Workers Compensation Fraud prosecuted only 335 workers compensation fraud cases successfully.'-compensation-fraud. This is out of tens of thousands of work injuries reported during that time. Also note, those 335 cases include all types of fraud cases: employer and employee.

With so few actual fraud cases being prosecuted successfully against injured workers it seems as if there has been a very successful marketing program that has led to the general public believing employee work comp fraud is a rampant problem. There simply isn’t evidence to support it. This isn’t to say it doesn’t exist, just that it isn’t a major problem occurring.

Employee Fraud: Exaggerated Story or Real?

Most often people have heard stories from a “friend of a friend” that scammed their employer. Usually, this person has minor injuries and get way too much money for that injury. Most often these stories cannot be verified.

In Florida, workers’ compensation settlements are public record and can be checked. Employees cheating the workers’ compensation system has become the source of jokes and popular culture. What most people do not consider is the number of safeguards in place for workers’ compensation fraud on the employee side to be prevented.

For any benefits to be provided to an injured worker, it is the burden of the injured worker to prove multiple things including:

  • The injury occurred in the course and scope of employment as well arose out of the employment. This statement seems simple enough, but it can become more complicated depending on the circumstances. For instance, if there are no witnesses, or if the accident occurs in a location not exactly on the employer premises, like a parking lot.
  • A physician that has been chosen and authorized by the employer and/or insurance company has issued an opinion stating the injured worker has an injury that requires additional treatment and the major contributing cause of that treatment is the work injury.
  • The opinions of that doctor must be based upon objective medical evidence. This is very important because many people think injuries on the job are faked. In Florida, the injury must be verified by the physician with objective evidence. Meaning, complaints of pain are not enough to get any treatment or work comp benefits.
  • That same physician places work restrictions on that injured worker. In order for the injured worker to get a single dollar paid by work comp, those restriction must prevent the worker from returning to the employer even at a modified duty.

Considering the actual amounts of workers compensation fraud prosecuted in Florida, the public image of how common employee fraud is has been vastly exaggerated.

Employer Fraud: Underreporting and Paying Under the Table

What some people don’t realize is that when an employer commits workers' compensation insurance fraud, many times it actually means multiple types of fraud are being committed.

Often an employer will underreport the wages of an employee or not report them at all to their work comp insurance carrier. This is against the law for numerous reasons. When they do that the insurance company can’t properly insure the accidents that take place. It’s a fraud against the insurance company.

What also takes place is the employer has to pay that employee in cash, off of their bookkeeping records. Sometimes this is called being paid “under the table”. Being paid this way to avoid paying a higher work comp insurance premium automatically means the employer has committed tax fraud. Being paid off the records or under the table means they aren’t paying the payroll taxes required by law. So, they are cheating the insurance company, the IRS, and their employees that won’t be properly insured in the case of an on-the-job injury.

Here is an example of an actual case of employer fraud: FL CFO Announces Arrest in $365,000 Miami Workers’ Comp Premium Fraud Scheme

This employer is being investigated for concealing almost $2 million dollars in payroll in order to avoid paying workers’ compensation premiums. The cost to the workers’ compensation system when this occurs is significant. This employer could face up to 30 years in prison. That much of punishment shows how much damage employer fraud can cause.

Here is another example of employer fraud: Alachua County Man Sentenced to Prison for Harboring Undocumented Aliens and Evading Workers' Compensation and Payroll Taxes

In this case, the owner of a roofer, tree, and dumpster service in Gainesville, Florida, was sentenced to prison for a year and a day. The employer had created a complex scheme that avoided paying $1.7 million dollars in federal income tax, social security, and Medicare taxes; along with $1 million dollars in workers compensation premiums. This scheme was done in order to allow the employer to underbid his competition. So, it not only cheated the IRS and the work comp insurance system but disrupted a fair playing field among other companies bidding for work. That behavior encourages other competitors to cut corners just to get work. This was a sophisticated operation that is far more dangerous than a single employee involved in work comp fraud; however, these types of stories are not shared as often.

These two examples are employers in the construction industry. The construction industry is inherently a more dangerous work place than many others such as an office or retail environment. Their employers know this and are actively trying to avoid providing the insurance coverage that provides medical treatment when their employees get hurt. These are bad actors in the system that get caught sometimes, but largely go unpunished.

Employers Fraud Often Targets Marginalized Employees

Workers’ compensation fraud on the employer's side also targets many marginalized groups of the population. Typically, a new employee isn’t going to demand to see that their employer has properly placed them on their workers’ compensation insurance policy. It’s a trust situation in which the employer has a duty to protect the people they hire.

Some employers are more likely to commit fraud because they have employees that are typically easier to take advantage of in this type of circumstance. When there are lower-income or non-native English speakers as employees, employers are much more likely, at least anecdotally, to take advantage of these employees.

Lower-income individuals might have a greater fear of losing their jobs if they report their employer for not having workers’ compensation coverage. Non-native speakers, if they are undocumented workers, might fear they will be subject to deportation if they report their employers. Either way, it is unfortunate when employers see their employees as people to target. When these employers are not reported, they virtually get away with not paying for the coverage, the taxes, or the medical treatment for their injured worker. Nothing prevents them from becoming repeat offenders.

The responsibilities of an employer for an employee are not new. For hundreds of years, the use of terms such as “master” and “servant” was used to describe the obligations of an employer to an employee. These terms were unfortunately taken from the days when the servant or employee was legally bound to serve the master or employer, however it provides context for the long history of the obligations an employer has to their employees.

Employers in the state of Florida have an obligation and requirement to provide workers' compensation insurance coverage for their employees, unless they fit within a few narrow and clear set of circumstances. If they shirk that responsibility, they are harming many entities in the system including their own employees.

At Carrillo Injury Law, we strive to protect the rights of injured employees. If you believe that you have a case under the law, reach out to me, Matthew Carrillo, by emailing