Workers’ compensation fraud perpetrated by NY employers is common

EHS magazine observes that stories of employees who fraudulently seek workers' compensation benefits have been common in the media. By contrast, employers who scam the system "don't seem to get as much press." That may be changing. The Risk & Insurance website reports that 2014 was a busy year for workers' compensation reform. Specifically, 2014 saw state governments-including New York-cracking down on employer workers' comp fraud by stepping up investigations, audits and criminal prosecutions. Employers usually commit workers' comp fraud in a misguided and illegal attempt to keep their workers' compensation insurance premiums at a minimum.

One of the catalysts for increased crackdowns on employer fraud in 2014 appears to be a grand jury report announced by Manhattan District Attorney Cyrus R. Vance Jr. According to the DA's office, the report was generated from investigations by the DA's office into false information provided to state authorities in connection with applications for, and audits of, workers' compensation insurance policies.

Vance noted that workers' compensation insurance provides "critical protection" to workers. Disturbingly however, the grand jury report concluded that the New York workers' compensation system was vulnerable to fraud perpetrated by employers. In particular, the report concluded that many employers-especially those in the construction industry-deliberately misclassified employees as independent contractors in order to keep their workers' compensation insurance premium payments low.

For companies where workers' compensation insurance is mandatory, there is no question but that the insurance premiums can significantly impact a company's cost of doing business. While there are often legitimate steps a business owner can take to reduce workers' compensation costs, some employers decide instead to misclassify their employees as independent contractors. Not only does this violate New York law, it also adversely affects the bottom lines of honest businesses that do play by the rules. For example, if a business keeps its insurance premiums low by misclassifying employees, it can keep overhead expenses artificially low. This, in turn, allows a dishonest business to underbid honest companies in selling their goods or services.

The NY Grand Jury recommended that the following steps be taken to deter cheating by employers: (1) increased penalties commensurate with the magnitude of the fraud committed; (2) increased transparencies in the audit procedures; (3) broader data collection and collaboration among state and local agencies; and (4) new educational efforts aimed at making employees more aware of their rights while making employers more aware of their obligations.

Evaluating your status

If you are an employee rather than an independent contractor, you may qualify for workers' compensation benefits if injured on the job. According to the NY Department of Labor, no single factor or group of factors conclusively defines an employer-employee relationship. However, an employer-employee relationship may exist when the company you are performing services for:

  • Chooses when, where and how services are performed.
  • Provides the facilities, equipment, tools and supplies.
  • Directly supervises the services.
  • Sets the rate of pay.
  • Requires attendance at meetings and/or training sessions.
  • Requires your exclusive services.

Signs that you may be an independent contractor include situations where you: (1) have your own established business; (2) set your own pay rate; (3) offer services to more than one businesses; and (4) keep a place of business and invest in facilities, equipment and supplies.

Seek legal help

If you have sustained an on-the-job injury, you should contact a New York attorney who has experience at handling workers' compensation claims. An attorney who is knowledgeable in workers' comp law can help you aggressively pursue a claim for benefits.