by Les Boden
Today, The New York Times reports on an important study that shows us the tip of the iceberg of employer workers’ compensation fraud.
The Fiscal Policy Institute compared payroll dollars reported to the New York State Workers’ Compensation Board with payroll reported to the unemployment insurance (UI) system. They found that employers report 20% lower payroll to workers’ comp than they do to UI. Workers’ comp premiums are based on reported payroll, so this underreporting is a way of cheating on these premiums.
This is only part of the story, because the Fiscal Policy Institute study also documents that employers have been working diligently to avoid paying UI premiums – not to mention Social Security taxes, health insurance, retirement benefits, and so on – by claiming that their employees are “really” independent contractors. So workers’ comp payroll is 20% below UI payroll, but UI payroll is probably 5-10% below true payroll, for employers who report. And let us not forget the cash economy, where wages go completely unreported, there is no workers’ comp coverage, and benefits aren’t even an issue.
The employer fraud story doesn’t end there. Workers’ comp premiums are based not only on payroll but on occupation. So classifying a construction worker as a clerk can have a very salutary effect on workers’ comp costs.
Finally, employers can pressure injured workers not to file claims, can deny claims that are filed, and can underpay benefits for accepted claims. They can, and they frequently do. State of California audits (see p. 73) found underpayments in well over 10% of workers’ comp claims, with an average underpayment of $1,252 in 2005.
For those of you who don’t yet know how much you’ll miss Confined Space, you may want to read – or re-read – Jordan Barab’s series on “Cooking the Books”.
Les Boden, PhD, is Professor and Associate Chair of the Department of Environmental Health, Boston University School of Public Health. Dr. Boden is a member of the National Academy of Social Insurance and has been an active member of Federal advisory committees for both the Centers for Disease Control and the Department of Energy.
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January 26, 2007 at 10:43 am
Workers’ Compensation Fraud: Bad Apples or Broken System? « The Pump Handle
[…] post by Les Boden on workers’ fraud by employers brings up an important question: How much fraud is […]
January 6, 2010 at 12:30 am
Sergio
My employer withheld about 80% of my wages for a month payroll. It claimed that I did not have leave balances to cover for 2 weeks of sick leave due to my job accident. After over a year now, my Employer not only has withheld my wages but later demoted me to a lower title and with it reduced my wages further as well. I think my employer is committing Worker Compensation fraud.
March 30, 2010 at 12:52 am
margaret
My Government employer has denied valid worker’s comp cases. As well as denying others of valid claims. Also has taken 2 years retirement from me because of being injured on the job. Who oversee’s this?
December 10, 2010 at 3:29 pm
mick
I have insurmontable evedance and a great deal of wittneses of the kind of work comp fraud,discrimanation and retaliation from my employer RIEBE’S NAPA AUTO PARTS and yet we take a blind eye to it.
December 18, 2010 at 7:23 am
JS Mackie
It is indeed a shame when officials or individuals engage within such practice to defraud funds such as this, as well as those that engage in falsifying payroll information and negligent accounting practices, as is highlighted by the many case studies of recent times in terms of the financial meltdown!