Workers’ compensation fraud can significantly impact your company’s bottom line. The costs can escalate rapidly, including increased workers’ compensation premiums, legal fees, and other uninsured costs. Beyond the expense, it’s poisonous to your workplace culture. In one company I worked with, we faced over a dozen suspicious claims. We learned that fraudsters would commit fraud as long as they think they can get away with it. One case we work on involved an employee who claimed he slipped in the restroom, injuring his back, neck, and shoulder! A few days later, we had him on video changing his windshield wipers. When his lawyer pushed for a settlement, we refused. Settling would have been blood in the water – inviting more sharks. You’re setting a dangerous precedent if you let a fraudulent claim slide. The key to protecting your business is to stop fraud before it starts.

Understanding Workers’ Compensation Fraud

Workers’ compensation fraud is not just a financial burden; it’s a serious crime. Fraud cases are felonies and are handled in criminal courts. Understanding what constitutes fraud is crucial to protect your business and deter potential offenders.

What is Fraud?

Fraud in workers’ compensation involves:

• Making or presenting a knowingly false statement in support of or opposing a workers’ compensation claim with the intent to defraud.

• Soliciting, abetting, helping, or conspiring with someone to commit the above.

Felony Fraud Scenarios

Fraud can occur in several ways, involving not just employees but also employers, medical providers, and legal professionals:

Employee Fraud:

• An employee files a claim for an injury that did not occur or did not happen on the job.

• Employees receive total temporary disability benefits by lying about outside employment or their ability to work.

Medical and Legal Provider Fraud:

• A provider bills for services never provided.

• A provider bills for more time than is spent, or additional services are not provided.

• Kickbacks are given to employees for referring or settling workers’ compensation claims.

Employer Fraud:

• An employer under-reports total payroll.

• An employer misclassifies employees to gain a lower premium rate.

• An employer fails to report claims (ex-mod evasion).

A quick note for business owners: Please do not engage in employer fraud to save a few bucks on your workers’ compensation premiums. It is not worth it. Read our blog post; there are lots of legitimate ways to save money on insurance. 

Preventing Workers’ Compensation Fraud

Due to the prevalence of workers’ compensation fraud, companies must take proactive measures. Implementing best practices can protect your company.

1. ** Prioritize Workplace Safety: ** Develop a safety program. Hold regular safety meetings and reward workers for meeting safety milestones. A culture that encourages safety makes fraudulent claims less likely. Group incentives for incident-free periods can create positive peer pressure.

2. Establish a Clear Stance on Fraud: Explain the purpose and benefits of workers’ compensation to employees and emphasize your zero-tolerance stance on fraud. Ensure everyone knows how to report suspicious claims anonymously.

3. Communicate a Fraud-Free Workplace: Use newsletters, posters, and even email communications to highlight that workers’ comp fraud is serious. Detail the anonymous reporting process to encourage vigilance.

4. Designate a Medical Provider: Use a designated healthcare provider for all employees. Every injured employee should be required to submit a written statement detailing the injury and what caused it. Ensure that what is reported to the medical provider is consistent with the employee’s statement. As a side note, the medical provider should outline any work restrictions to ensure the employees don’t re-injure themselves during recovery.

5. Screen New Hires: Conduct comprehensive background checks to look for red flags like previous fraudulent activity. This includes checking criminal records and, if red flags appear, also checking credit reports, driving records, and other relevant documents to verify that what was indicated on the job application is true.

6. Install Video Cameras: Video Monitoring can deter workers’ comp fraud and other workplace crimes.

7. Require Drug Testing: Provided it is legal where you are located, institute a drug testing policy to deter fraud and reduce workplace injuries. Drug users are more likely to file false claims and engage in unsafe behaviors.

8. Outline Procedures for Workplace Injuries: Designate someone to handle injuries. Have this person call for medical help, alert the medical provider, document accident details, collect witness statements, take pictures, gather evidence, and report the injury to management, HR, and the insurance company.

9. ** Investigate All Claims: ** Document all facts immediately. Investigate every incident and complete a root cause analysis. This procedure helps mitigate fraud and identify areas for improvement. Train HR and supervisors to recognize fraud and know what steps to take.

10. Identify Red Flags: Look for signs of fraud, such as exaggerated details or inconsistent accounts. Those with inconsistent stories, stories that conflict with witness accounts, and criminal records should warrant closer scrutiny.

11. Listen to Employees: Pay attention to employee conversations. Employees can provide insights into the legitimacy of a claim. Ensure workers are familiar with and know how to report suspicious claims and take all allegations seriously without premature judgments.

12. Stay in Touch with the Injured Worker: Regular communication with the injured worker shows concern and reduces the temptation to try to game the system. Monitor their progress and encourage their return to work.

13. Have a Return-to-Work Policy: Create light-duty positions for recovering employees. Reinforce that your goal is their well-being and swift return to work.

Conclusion

As a business owner, you have the power to protect your company from workers’ compensation fraud. You can significantly reduce the risk by understanding what constitutes fraud, recognizing the signs, and taking decisive action. Regular training for management and employees on safety, fraud detection, and proper procedures is crucial. Remember, the best defense is a good offense.