Can I Delay Benefits If I Suspect My Employee of Workers’ Compensation Fraud

Workers’ compensation fraud costs Californians tens of millions of dollars each year.  The state of California has put into place many programs, laws, and departments to help combat this type of fraud.  The programs put in place help stop fraud before it starts, as well as prosecuting those who have already committed these crimes.  It is admirable for employers to want to help with the efforts to put a stop to fraud.  Some employers may wonder if they can delay workers’ compensation benefits if they suspect their employee is committing fraud.

The short answer to this question is “no.”  There are a lot of potential red flags for workers’ compensation fraud that an employer can be on the lookout for.  These include such issues as a lack of witnesses to an injury, delayed reporting, or the first report of an incident coming straight for an attorney.  When an employer receives a report of an incident with one of these fraud red flags, it may be tempting to refuse to take the written report or even to hold off until the employee can have a medical evaluation.  This is not permitted under California law.  Even if you suspect your employee is faking the injury, you are still required to provide your employee with a workers’ compensation form within one working day after the employee reports the work-related injury or illness.  Once the employee returns the form, the employer will have one working day to forward the claim form to the claims administrator of the workers’ compensation insurance company.  There are no exceptions to this for potential fraud.

Not all suspicions of fraud come at the very beginning of the case.  It is possible that as the case progresses, an employer may see other signs of fraud, such as social media posting showing the employee is active, potential medical fraud, or malingering.  If this occurs, an employer still does not have the right to put a halt to or somehow intercept the payments that are being made to the employee under workers’ compensation.  Instead, the employer should carefully document all concerns and report them to his or her workers’ compensation claims administrator.

We have extensive experience with helping our clients understand the role of their business in fraud prevention.  Call us today to discuss your case and what we can do to help.

Investigating a Workers’ Compensation Claim

There are many important components of a workers’ compensation case.  Proper paperwork, obtaining medical treatment, and sorting out reasonable and necessary accommodations are just a few examples.  Investigating a workers’ compensation claim is also an important component.

When an employee sustains a work-related injury, the first step is, of course, to make sure that employee receives the necessary, immediate medical treatment.  Once it is confirmed that the situation is no longer an emergency, the employer can then turn to the administrative side.  An employer is required to provide the workers’ compensation claim form to the employee within one working day of being notified of the injury.  The employer should also move forward to an investigation.

Investigating a workers’ compensation claim does not mean that you suspect the injured employee of lying or taking other fraudulent action.  Moreover, regulation 10109(a) provides that a claims administrator “must conduct a reasonable and timely investigation upon receiving notice or knowledge of an injury or claim for a workers’ compensation benefit.”  This means that an investigation is not just advisable, but required.  If the investigation is not completed within the time limit, then section 5401 provides that the injury shall be presumed to be compensable under workers’ compensation.

A proper investigation often means collecting evidence from more than one source.  If there is video surveillance covering the area where the employee sustained an injury, that video surveillance footage often provides crucial and best information about how the injury occurred.  Eye witness accounts also may provide important information.  Eye witness accounts should be gathered immediately, as the longer you wait to record that information, the less likely it is that the witness statements will be completely accurate.  An investigation can also include talking with other employees or supervisors who work in the same area, even if they did not witness the event.  They may have information about how work is usually performed, how equipment functions, and the likelihood that the injury occurred in the manner explained by the injured employee.

An investigation can and should also include a review of social media.  Although the vast majority of workers’ compensation claims are valid, a small percentage are fraudulent.  Following social media can provide claims administrators or employers with clues that the employee is not as injured as claimed.

We have extensive experience in workers’ compensation cases ranging from minor injuries to death of an employee. Contact us today for a consultation to talk about your business.

Medical Fraud and Workers’ Compensation

Workers’ compensation exists to make sure that employees receive the appropriate compensation and medical care in the event they sustain a work related injury.  In the vast majority of cases, workers’ compensation claims are valid and the injured employee really does require medical care.  In some unfortunate cases, however, there may be medical fraud in workers’ compensation cases.

Medical fraud in workers’ compensation cases comes in many different forms.  One common form is when a worker either exaggerates or completely fabricates an injury.  An employee may state that he or she still needs medical care and accommodations at work even though he or she is actually no longer injured.  This is commonly known as “malingering.”  If an employee fabricates or exaggerates an injury to continue to receive benefits, the employee can be charged with insurance fraud, ordered to pay back the fraudulently received funds and even serve time in jail.  Common injuries that are seen with this type of fraud are soft tissue injuries, as there are no medical tests to determine whether the injury has sufficiently healed and the employee is the only one who can say whether there is still pain or limitations because of the injury.

There are also much more complicated types of medical fraud.  These are typically white collar crimes that may involve multiple layers of fraud and multiple offenders.  These types of schemes may include doctors and attorneys who encourage others to exaggerate their injuries.  Doctors may over treat the patient to continue receiving payment for services and may over prescribe drugs, including harmful and addictive substances like powerful opioids.  Doctors receive payments for unnecessary treatment and the cost of insurance companies, and that cost is ultimately passed on to tax payers and others who must purchase workers’ compensation insurance.

In recent years, the state of California has made significant efforts to identify and prosecute workers’ compensation fraud, including medical fraud.  During the 2015-16 fiscal year alone, 167 cases were referred to prosecutors by the fraud division, totaling a potential loss of almost two hundred million dollars.  In addition, during that same time period, district attorneys reported 731 arrests.  Restitution of over fifteen million dollars was ordered in connection with the successful convictions.

If you have questions about workers’ compensation fraud, contact us today.  We can talk with you about fraud concerns and how you can comply with the law.

When to hire a PI

Employers work hard to make sure that their employees are safe from injury on the job.  Unfortunately, there are times that despite the most careful precautions, an employee sustains a work-related injury and will accordingly submit a claim for workers’ compensation.  The vast majority of employees who submit a claim for workers’ compensation are validly injured and will want to return to work as soon as possible.  Unfortunately, there are a handful of dishonest people who will try to abuse the system.  If you are an employer who suspects your employee is not being totally honest about the work related injury, you may consider hiring a private investigator.

One reason you may want to consider hiring a private investigator is if the medical reports fail to match up with the severity of the injury that the employee is reporting.  This could be both in terms of the acute symptoms as well as how long it is taking the employee to recover.  When an employee commits fraud by exaggerating the severity or duration of his or her injury, it is called “malingering,” and can be a good reason to hire a private investigator.

Another reason could be if the employee’s social media shows him or her engaging in activities that do not seem compatible with the injury.  For example, if the employee states the his or her back pain prevents him or her for standing or sitting for any longer than thirty minutes, but social media indicates the employee spends weekends hiking, hiring a private investigator can help provide more proof of fraud.

Another red flag for fraud that may suggest you want to hire a private investigator is if the employee has filed lots of workers’ compensation cases in the past.  This may indicate that the employee knows how to “work the system” and has made a habit of filing fraudulent claims and malingering.  Hiring a private investigator can help you get details about past claims as well as information about how the employee is spending his or her time away from work.

A private investigator can fill many roles, such as setting up surveillance, collecting information from the internet, and talking to witnesses to the event.  The private investigator can help you uncover fraud and move forward.

We have experience assisting our clients with fraudulent workers’ compensation claims.  Call us today to talk about your business.

Fraud Red Flags

Workers’ compensation is an important system which was put in place to protect workers from unscrupulous employers who would prefer to put the well-being of their business over the well-being of their employees.  The workers’ compensation system provides protections to an injured employee to make sure that he or she receives compensation for work-related injuries.  The system also provides protections to employers by helping create checks and standards for injuries and compensation limits.  California has also established special state task forces to help deal with the problem of workers’ compensation fraud.  Although the majority of workers’ compensation claims are valid, employers should keep a look out for some red flags for workers’ compensation fraud.

One red flag is a delay in reporting the incident.  For most employees, an injury severe enough to require medical attention is not an incident to be taken lightly.  Most employees who have actually sustained a work-related injury will immediately report being hurt.  An employee who waits days or even weeks to report the injury could be committing fraud.

Another common red flag is when the employee is inconsistent or vague about the details of the incident.  Employers should look for employees who frequently change the version of events or cannot remember important details, such as the date or location of the incident.

The lack of witnesses or the type of witnesses also can be a marker for fraud.  An employee whose job responsibilities typically include working together with others or in front of large groups, but who sustains an injury while he or she just happened to be alone is a red flag.  Moreover, if the only witnesses available are the close friends or family members of the injured, it may be important to investigate further.

Where you have a difficult time following up with the employee while he or she is supposed to be at home recuperating, this can also be a red flag.  In this situation, employers should watch for situations in which repeated phone calls or attempt to contact the employee during normal business hours are unsuccessful.  Family members who answer the phone may seem noncommittal about the injured employee’s whereabouts, or always claim the employee is sleeping.

Workers’ compensation fraud can have a serious impact on your business.  Call us today to talk about how we can help protect your business.

Premium Fraud and AA Buffet

Fraud in the workers’ compensation system comes in many forms. It can come from employees, medical providers, and even employers. All types of fraud have a detrimental impact not only on those directly impacted by the case but also on the entire system at large. Fraud costs tax payers millions of dollars and can drive insurance premiums for workers’ compensation even higher. As a result, California takes steps to crack down on fraud, including from employers. Workers’ compensation fraud involving employers can mean that the employer is lying about the nature or number of its workers or about the nature of the work performed. In a March 2017 case, an employer pled guilty to charges arising out of workers’ compensation fraud.

The defendant, Chang Tai Lin, was the owner of AA Buffet. In May 2015, the fraud unit began an investigation into the defendant’s business after receiving a tip from the district attorney. The fraud unit began conducting surveillance, obtaining documents from the police department, health department, insurance companies, and other state agencies. In March 2016, a search warrant was executed not only on the AA Buffet but also at the defendant’s home. As a result of the investigation, it was discovered that from April 2010 through April 2016, the defendant had been underreporting the number of employees working at AA Buffet as well as falsely reporting payroll wages, as he actually paid many of his employees in cash. It was also discovered that the defendant had been committing tax evasion from October 2010 through April 2016 because he failed to accurately report employee wages or payroll taxes to the Employment Development Department. After the investigation, the defendant pled guilty to two counts of making a material misrepresentation in order to obtain a workers’ compensation insurance premium as well as one count of willfully failing to file payroll tax returns with intent to evade tax. Employers are required to accurately report the number of employees to their workers’ compensation insurance company. Failure to accurately disclose the workers or the type of work performed by the company can clearly result in harsh penalties, including both fines and jail time, for offending business owners. It is essential that employers understand and live up to their disclosure obligations to their insurance carriers.

Understanding your insurance obligations is essential to making sure you and your business are not running afoul of the law. Call me today at (714) 516-8188 if you wish to  discuss your business’s obligations.

Fraud and People v. Snow

The State of California has taken many steps in recent years and legislative sessions to lessen the amount of fraud perpetrated in the workers’ compensation system. During the fiscal year of 2015-2016, the California Fraud Division reported over 5,300 cases of suspected workers’ compensation fraud and made 249 arrests. Although the vast majority of employees who sustain a work-related injury have valid claims, there are some unfortunate cases when the employee is defrauding his or her employee. When this happens, employees may face criminal prosecution under a variety of legal theories.

In People v. Snow, the employee faced a number of repercussions for her fraudulent behavior. In that case, the defendant worked at Trader Joe’s stocking shelves, gathering shopping carts from the parking lot, customer service, and other similar tasks. The defendant made a claim for workers’ compensation claiming that her wrist hurt and she had sustained injury from repetitive action required in performing her job duties. The defendant’s claim was approved for three months of disability benefits. After the defendant returned to work, she claimed on her first day back to have injured her back while bringing three shopping carts in from the parking lot. Although she was later cleared to return to work, she did not do so, and instead sought treatment from a new doctor, claiming she had pain while doing household tasks such as laundry, dishes, and driving – claims she repeated during a deposition. The supervisory claims adjustor determined the second claim required further investigation and hired a private investigator. The investigator observed her at the beach, lifting a paddleboard from the roof of her SUV and carrying it and the paddle approximately 150 feet to the beach. After paddleboarding for approximately 45 minutes, the defendant returned to shore and carried the paddleboard and paddle back to the SUV and strapped the on the roof herself. Nevertheless, the defendant persisted in telling her doctors she could not lift things over her shoulder or stand for prolonged periods of time, which she repeated during depositions. Ultimately, the defendant was charged with perjury after the video of the defendant at the beach completely undermined her claim of disability. Thereafter, the defendant was charged not only with insurance fraud but also with perjury based on statements made at depositions concerning her second workers’ compensation claim. She was ultimately convicted of two counts of perjury as well as three counts of making false or fraudulent statements to obtain workers’ compensation benefits. Although the defendant then appealed her conviction claiming that this violated her right against double jeopardy as the convictions were based on the same incidents, the court disagreed and affirmed her convictions.

Workers’ compensation fraud is a serious problem and you should take all steps to protect your business. Contact me today at (714) 516-8188 if you wish to discuss fraud and protect your  business.

Psychiatrist Fraud in Workers’ Compensation Cases

The workers’ compensation system is designed to cover a large variety of work-related injuries. These injuries could range in type from a broken finger to repetitive stress injury to psychiatric injury. Unfortunately, some types of injuries are more likely to be a source of a fraudulent claim or unnecessary treatment, such as soft tissue injuries. Psychiatric injuries can also be a source of fraud, both in the case of the injured worker and the psychiatrist.

One red flag for fraud on the part of the psychiatrist is a very short amount of time spent with the patient. A real psychiatric assessment should take no less than a couple of hours. A quick “in and out” could be a red flag that the psychiatrist is simply trying to move the patients through without providing actual care or careful diagnoses

Another red flag could be a lack of using common and accepted diagnostic tools. For example, there are widely used and accepted tests to look for malingering. A psychiatrist in a workers’ compensation case should be on the look-out for malingering, and a failure to attempt or recognize this type of fraudulent behavior on the part of the patient could be a sign of fraudulent behavior on the part of the psychiatrist.

Finally, employers should be on the look-out for the type of assessments and also that a differential diagnosis actually demonstrates a disability. Although a diagnosis of psychiatric injury absolutely can result in temporary or permanent disability, this is not always the case. Employers need to be vigilant for a situation wherein a worker has a psychiatric injury diagnosis that may be long term but still is very high functioning.

California has been cracking down on fraud and taking steps to end fraud both on the part of workers and medical providers. In a recent case, a psychiatrist named Jason Hui-Tek Yang was suspended from participating in the workers’ compensation system after he was convicted for involvement in an insurance fraud conspiracy. The conspiracy involved referring patients for unnecessary treatment in order to bill the workers’ compensation system. It was determined that Yang had over 2,000 active liens worth over $13,000,000.

Fraud in the workers’ compensation system can come in many forms. If you have questions about how to protect your business, call me today at (714) 516-8188. We can discuss your business and what we need to do to make sure you are protected.

Rescinding a Workers’ Compensation Policy

Employers in California are required by statute to carry workers’ compensation insurance for all of their employees, with only a few, limited exceptions. Failure to carry insurance can result in severe penalties for an employer, and can easily climb into tens of thousands of dollars. Premiums for this insurance are also costly, however, and some employers attempt to keep that cost down by not being completely honest with the insurance company. Employers have been found to lie about the number of employees, the nature of the business, or the location of the work performed, all in an effort to cut the cost of the insurance premium. If the insurance company then discovers the fraud, it can cancel the insurance policy. In Southern Insurance Co. vs. Workers’ Compensation Appeals Board, EJ Distribution Corp. et al., the issue of rescinding an insurance policy for a trucking company was at issue.

In that case, the workers’ compensation insurance company issued a policy to EJ Distribution Corp. The application for insurance incorrectly indicated that the employees would not travel outside the state of California or  farther than 200 miles from the business. Later that same year, a worker injured his back while in Tennessee and performing work for the employer. The next month, the worker filed for workers’ compensation and the employer filed a claim with the insurance company. In June, the insurance company notified the employer that they would be rescinding the insurance policy based on the material misrepresentation made by the employer in that it failed to state that its employees were actually long-haul truckers. The insurer applied this rescission retroactively, returned the policy premiums paid to that date, and cancelled the policy going forward. The employer and insurer submitted to mandatory arbitration. The arbitrator determined the insurer could not retroactively rescind the policy, based on some ambiguities in the state statutes. The WCAB disagreed. It determined that California’s insurance code does provide for rescission of policies and the law makes no exception for workers’ compensation policies. The court determined that there was evidence that the employer made knowing misrepresentations to the insurer, but there was not a decision about whether the misrepresentations were material, which is required for rescission to be the appropriate remedy. The WCAB sent the matter back to arbitration to make the determination

The workers’ compensation system has many important requirements for employers. Call us today at (714) 516-8188 and let us talk with you about your business and what you need to do to make sure you are in compliance.

Employee Misclassification Mistakes and Why It’s Important

Owning a business is complicated and has many “moving parts.” Getting everything done to make your business run smoothly can often require using resources outside of your business and hiring help for temporary or small jobs. With so many complex business relationships, it can sometimes be easy to lose track of who is your employee and who is just an independent contractor. This seems like a fine distinction, but it is essential that you get it right for purposes of complying with the California workers’ compensation statutes, as California businesses are required to carry workers’ compensation insurance for their employees.

One common mistake made by employers is believing that a written contract will control the determination of whether a worker is an employee or an independent contractor. This is definitely not true. This makes sense, as allowing a written contract to be completely controlling in whether a worker is an independent contractor or an employee would allow unscrupulous employers to classify all workers as independent contractors to avoid paying certain taxes and workers’ compensation insurance. Instead, a number of other factors, such as the nature of the work that the worker performs for the business is much more important to the classification determination. A related mistake is allowing an employee to make the determination as to whether he or she wants to be classified as an independent contractor or an employee. A worker’s preference has no bearing on whether the worker is properly classified.

A business can also make a mistake by trying to control the time, place, and manner the work is completed when dealing with a worker already classified as an independent contractor. If a business attempts to exercise to much control over the manner in which the work is done, the classification could be incorrect. The less control a business exercises over a worker, the more likely it is that worker has been properly classified as an independent contractor.

Getting the classification of workers right is essential for your business. The California labor code provides harsh penalties for businesses that have been found to misclassify employees in an attempt to get out of paying for workers’ compensation insurance. These penalties can run thousands of dollars per violation, and get steeper if the employer has a history of misclassification.

Proper classification of workers is an essential step for businesses and should be done with mindfulness. Contact us today at (714) 516-8188 to talk about your policies and your business.

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