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Workers’ compensation fraud in the California construction market

On Behalf of | May 28, 2021 | Blog, Workers' Compensation |

When a worker suffers an injury on the job, the hope is that there is protection available for them through their employer. Even if a worker goes years without an injury, it may be comforting to know that there is compensation insurance in place to shore up the loss from days spent recovering from a serious accident.

According to Insurance Journal, the California Department of Insurance arraigned two owners of a flooring installation company for insurance fraud.

How they allegedly did it

As the news report details, the CDI initiated an investigation after an insurance carrier discovered that two people were working for the flooring installation company without a license. They were receiving 1099 forms as independent contractors despite the owners identifying them as employees.

The investigation resulted in the CDI accusing both owners of three felony counts of workers’ compensation fraud. This underreporting of payroll and employees resulted in nearly $3.8 million in losses to insurance companies.

How this affects workers

It is unclear from the report whether or not employees for this company were ever seriously injured during their shifts. But the investigation found that the company had a large number of employees and reported minimal to no payroll to its insurance carriers.

Workers’ compensation varies depending on how an employer classifies its workers. In this case, this loss to insurance companies does not just reflect a loss to corporate business interests — it reflects a serious risk to workers on the job.

Employer underreporting and misclassification is not a new thing. Workers who feel their employer misclassified them may want to research further and double-check that their employer provides the proper workers’ compensation insurance for their labor.