Workers Compensation Frauds

Worker’s Compensation frauds committed by employers consist of the biggest percentage of all. According to Johnson, employers is the real problem behind the frauds as it is the most expensive for insurance companies. While some states like Florida, California, Texas and Ohio is fighting all types of Worker’s Compensation fraud, others do not. In the estimate provided by the Department of Labor, between 10 to 30 percent of employers misclassified some employess15. Since the premiums are extremely expensive for the employers, they often underreport the payrolls and misclassify their employees in order to reduce the premiums that they have to pay to get coverage. Underreporting and misclassification not only cheat the insurance companies which
Unlike the employee frauds, where it is important to look at why and not how. Employer frauds are the completely opposite. The why is simple, because they want to reduce costs thus increase profits. The how is what never ceases to amaze. In 2012, eight people are facing charges for Worker’s Compensation frauds and money laundering by involving in a check cashing scheme. Hugo Rodriguez, the ringleader and the owner of a construction company, went out of his way to create numerous shell companies and funneled more than $70 million in order to avoid paying for the insurance premiums21. In 2013, Jess Contreras, the president and CEO
They defraud the State Compensation Insurance Fund and the insurance companies out of about $1.45 million from January 2008 to March 2012 by misclassifying their employees as having jobs that were less dangerous than they actually were22. In 2014, a class action was brought against Lowe’s by 4000 of “Lowe’s professionals” in California. Instead of as employees, Lowe’s classified all of them as independent contractors, which took away some of their employee benefits, such as Worker’s Compensation insurance coverage and 401k participation. Lowe’s did all of the following yet is cheating the systems by classifying them as contractors: ask these professionals to identify themselves as working for Lowe’s, to wear Lowe’s uniform, trained by Lowe’s, designated the customers for them to serve, customers pay Lowe’s directly, and oversee their works. Lowe’s settled the case for a sum that could be as much as $6.5 million plus additional damages that can be proved and an additional 25% of the total as Plaintiff’s attorneys’ fees23. In 2015, Sung Hyun Kim and Caroline Choi, who are the CEOs of sewing companies that were subcontracted by True Religion Brand Jeans, were arrested along with their CPA, Jae Kim, on 18 felony counts of Worker’s Compensation insurance fraud totaling more than $11 million in Los Angeles, California. The