NC cracks down on workers’ compensation fraud committed by employers

The Claims Journal has noted that many people have a tendency to believe that employee fraud, such as filing a false claim, is the costliest type of fraud occurring in the context of workers' compensation insurance. Indeed, instances where employees submit bogus claims for workers' compensation benefits often end up appearing in news accounts. In reality, however, fraud perpetrated by employers-rather than employees-ends up costing the workers' compensation system more than does employee fraud. Moreover, employer fraud deprives employees of benefits for a work-related accident.

One type of employer workers' compensation fraud occurs when an employer misclassifies employees as independent contractors. Since there is no duty by employers to provide independent contractors with workers' compensation coverage, employers who misclassify workers can minimize the amount of workers' comp insurance premiums that they pay. The National Employment Law Project observes that the problem of misclassification is on the rise nationally and results in robbing both the workers' compensation and unemployment insurance funds of billions of dollars annually.

According to the NELP, an analysis of data provided by various states strongly suggests that 20 to 30 percent of employers-and possibly more-misclassify at least some of their employees as being independent contractors. This would mean that, nationally, several million workers are deliberately misclassified as regards their employment status. Misclassification rates are disproportionately high in certain industries such as construction, real estate, home care, trucking, janitorial and-somewhat surprisingly-high-tech jobs.

The Benefits Pro website observes that companies that misclassify workers save approximately 30 percent in labor costs given the fact that they do not pay workers' compensation insurance premiums nor do they pay unemployment or payroll taxes. As a result, the misclassification of employees as independent contractors hurts law-abiding businesses who find that they are underbid on contracts by employers who illegally keep their overhead costs low.

The Raleigh News and Observer has reported that North Carolina has become a breeding ground for companies willing to misclassify their work force at the expense of honest business owners and vulnerable workers. While many states have experienced the problem of employers who fail to provide workers' compensation coverage for employees, North Carolina's attempts to root out employer fraud have been, until recently, "feeble."

Targeting fraud

It appears that North Carolina is finally taking employer workers' comp fraud seriously. According to a news release, the North Carolina Industrial Commission has employed a new weapon in the fight against employer workers' compensation fraud. This new weapon, designed to detect potential fraud, is the Noncompliant Employer Targeting System (NETS). NETS uses data collected by various state agencies to produce a register of possible noncompliant employers.

Employers appearing on the list generated by NETS are then investigated by the Commission to determine if they are trying to evade the requirement that employers provide workers' compensation insurance coverage for employees. Employers who are found to be evading the mandate to carry workers' compensation insurance will be charged with Failure to Maintain Workers' Compensation Insurance in violation of the North Carolina workers' compensation provisions.

Seeking legal help

Seeking workers' compensation benefits is sometimes not as easy and straightforward as perhaps it should be. Indeed, employers sometimes go to great lengths to challenge a person's entitlement to benefits. If you have sustained an on-the-job injury, you should contact a North Carolina attorney experienced in handling workers' compensation claims.