Workers' Compensation Fraud

What is Workers’ Compensation Fraud?

Workers’ Compensation in General

The Arkansas Workers’ Compensation program is a series of laws and regulations that were created to define and protect the rights of employers and their employees in situations where an employee is injured as a result of their job. For the employees it creates the right to receive necessary medical treatment and have it paid for by their employer, and to receive limited payments for any time they miss from work due to their injury. If the employee is permanently injured or disabled they may receive additional benefits in an amount determined by the nature and extent of their disability. Unlike a lawsuit brought in a regular court, the employee does not have to prove that the injury is the employer’s fault.

In return, the employer is protected from being sued by the employee for payments above and beyond those the employee is allowed under the workers’ compensation system, such as punitive damages. In addition, if the employee and the employer don’t agree on what the employee should be entitled to they can reach a resolution much more quickly and economically through the Workers’ Compensation System than through the regular courts.

In order to make the system work, the employer and employee have certain responsibilities. The employee must let their employer know if they are injured while working and must tell their employer the truth both about how the injury happened and how badly they are hurt.

The employer must make sure that enough money has been set aside to pay the medical bills and disability benefits for any employees who are injured. Under Arkansas law, almost every employer who has three employees or more is required to maintain Workers’ Compensation Coverage. Most employers do this by purchasing Workers’ Compensation insurance, but some choose to be self insured.

Employers may be charged with the crime of Failure to Secure Payment of Compensation (A.C.A. § 11-9-406) if they do not maintain Workers’ Compensation Coverage on their employees. Although this crime is different from Workers’ Compensation Fraud, we’ll discuss it here because it is closely related to Workers’ Compensation Fraud and carries the same penalties (D felony).

The employer must also be honest about the nature and risks involved in the employee’s job so the amount of money needed to cover future medical bills and benefits can be accurately determined. The employer must also provide the employee the forms necessary to start their claim and report the injury to the proper authorities.

Failure to Secure Payment of Compensation

If an employee is injured and discovers that their employer has not provided for them to be paid workers’ compensation benefits, they may contact the Arkansas Workers’ Compensation Commission or the Arkansas Insurance Department Criminal Investigation Division to report the violation. The employee may also file a claim with the Arkansas Workers’ Compensation Commission for the purpose of getting a court order to make the employer pay them any benefits the employee may be entitled to. It is important for the employee to continue to pursue a compensation award through the Workers’ Compensation Commission even if the employer is charged criminally with Failure to Secure Compensation. The criminal chare against the employer does not always guarantee that an employee will receive all the benefits they might be entitled to under an award of compensation, so it is important to keep both processes going.

The only things that must be proven in a case of failure to secure compensation are that the employer is required by Arkansas law to provide workers’ compensation coverage for their employees, and that they didn’t do it. The employer may be sentenced to up to six (6) years in prison and a fine of up to ten thousand dollars ($10,000) if they are found guilty of failing to obtain the required worker’s compensation coverage. The court may also order the employer to pay restitution to employees who have medical bills and lost wages as a result of their injuries.

Workers’ Compensation Fraud

Workers’ Compensation Fraud (A.C.A. § 11-9-106) can be generally defined as when an employee lies in order to get more benefits than they are entitled to under the law, or an employer lies in order to reduce the amount of money it costs to have workers’ compensation insurance. Workers’ Compensation Fraud is a class D felony. That means a person convicted of Workers’ Compensation Fraud may be sentenced to up to six (6) years and be given a fine of up to ten thousand dollars ($10,000).

The ways Workers’ Compensation Fraud can be committed are limited only by the imaginations of those committing the fraud and the things they can find to lie about. Most of the fraud attempts fall into one of several categories.

Employer Fraud

When employers commit Workers’ Compensation Fraud they will make misrepresentations related to either their coverage or employee claims. Coverage fraud involves lies concerning the risks involved with their business in an attempt to artificially reduce high insurance premiums, or avoid setting aside as much money to pay for future injuries. An employer may lie about how many employees work for the business or try to claim that some of the employees are “independent contractors.” Both of these misrepresentations are made to either make it look like risks involved in the business do not apply to as many people as they actually do in an attempt to lower the cost of coverage, or to avoid having workers’ compensation coverage at all.

Employers may also claim that their employees are doing a different type of work from what they are actually doing. For instance, the owner of a small poultry business might claim that all the employees of his company are secretaries or vice presidents when in fact they are all working as chicken catchers. This type of misrepresentation is common in high risk businesses such as construction because it is much less expensive to insure the employees as administrative or clerical workers than to purchase coverage for electricians or roofers.

Employers may commit claims related fraud to make their business look less risky than it actually is. They do this by paying doctors and lost time out of their own pocket, not filling out accident reports, or not filing claims. On occasion employers may lie about how an employee was injured in an attempt to avoid having to pay the employee benefits. These misrepresentations are all Workers’ Compensation Fraud and may result in criminal charges.

Indicators of Employer Fraud

Some of the common indicators of employer fraud are:

The company does not list enough employees to actually do the job.
The employee’s wages seem unusually low or high for the type of work they are supposed to be doing.
The employer or supervisor is known to have a grudge against an employee they claim was injured off the job.
This business has a lot of accidents that no one witnesses.

Employee Fraud

Employees may commit claim fraud in an effort to receive benefits they are not entitled to. Employees may claim to have been hurt in accidents at work that never happened. This is done in order to be paid for some time off of work. Employees may even stage accidents in order to claim benefits.

Employees who actually have accidents while doing their work may also try to get benefits they are not entitled to by pretending to have been injured more seriously than they actually were. By “faking” a more serious injury, they can get a longer period off work with paid benefits.

Employees may also lie about other employment or outside income while they are receiving temporary disability benefits. These lies are usually told to keep the employer from being able to reduce their disability payments or to keep their employer from knowing that they are doing work that shows the employee could return to their old job. Any of these types of misrepresentations are Workers’ Compensation Fraud and may result in criminal charges

Indicators of Employee Fraud

Some of the common indicators of employee fraud are:

The accident is not witnessed by anyone but the employee who is hurt.
The employee has had a long history of unrelated claims.
The employee waits an unreasonable length of time before reporting the accident or filing a claim. (For example, the accident happens on a Friday and the employee waits until the next week to report it.)
The accident happened right before an expected layoff or termination.
The employee has exhausted their other forms of leave.
The employee is out on disability but is never home when they are called.

Third Party Fraud

Besides the employers and employees there are third parties who may be involved in Workers’ Compensation Fraud. These typically fall into either of two groups, medical providers and legal representatives. These third parties may me guilty of Workers’ Compensation Fraud if they provide any false information related to either the claim or related to the services they have provided. These misrepresentations are usually intended to bolster false claims by an employee, or to bill for more services than they have actually rendered.

Third Party Indicators

Some of the common indicators of third party fraud are:

There are no medical records to support some of the treatments or procedures listed in the medical bills.
Inappropriate drugs or treatments are prescribed.
The employee reports that the bills include dates of treatment that never occurred.
The medical narratives do not change from visit to visit.
The attorney involved in this case always sends his clients to this particular doctor.
The attorney seems to be billing an unreasonable amount of time for the work actually performed. (For example, billing three hours of work for a short one paragraph letter.)