Employer Dishonesty Leading Cause of Workers' Compensation Fraud in NY, Report Finds

When most people think of Workers’ Compensation fraud, they imagine people claiming to be injured and collecting benefits while out working in their yard, taking luxurious vacations and even doing other jobs on the side.

Of course this type of fraud exists, but according to a new N.Y. Grand Jury Report, it pales in comparison to the little-known issue of Workers’ Compensation fraud committed by employers in New York State.

As reported by Property Casualty 360, “The report examined the vulnerability of New York’s workers’ compensation insurance system to fraud and misuse. It found that the largest component of the loss was unpaid workers’ compensation premiums, with personal income tax, withholding, unemployment insurance, and various other business taxes accounting for the remainder.”

New York County Prosecutor, Cyrus Vance, called the report “deeply troubling” and notes that “employers can easily lie about what work a particular employee performs, for example, reporting a roofer as a clerical worker, and thus paying a significantly lower premium.”

As an attorney representing injured workers, I am extremely sensitive to fraud of all nature, especially since there is an inordinate amount of time and energy spent trying to prove an injured worker may have committed a fraud.

What this report shows, and which has been known for years, is that the truly significant fraud is committed by those who undercut the system by not paying their fair share of premiums, therefore driving up the costs for honest employers who want to help protect their workers!

The insurance industry is always seeking significant increases for premiums and decrying fraud and waste. Yet lurking in their own backyard is literally tens of millions of dollars that the insurance companies have the right to charge but have failed to do so. $500 million in the NYC area for Construction alone - I am dumbfounded but not surprised.

Cleaning up this situation would greatly enhance the most important social aspect of the Workers' Compensation law - to help the most vulnerable injured worker receive quick medical care, wage replacement and assistance getting back to work, while at the same time protecting honest employers from additional costs racked up by dishonest employers looking to take advantage of the system.

Perhaps the "honor system" of allowing employers to self-report the employment status of their workers is something that must come under greater scrutiny in the months and years to come. If insurance companies and the state are truly committed to stopping fraud and waste, they'll shift their investigative powers off the injured worker, and instead onto those committing administrative fraud behind the scenes.