Workers’ Compensation fraud is a widespread, expensive problem. The National Insurance Crime Bureau estimates it costs around $7.2 billion per year including employer, employee, provider and third-party administrator fraud. This article focuses on employee fraud prevention.
Employee Fraud Defined
When an employee knowingly makes a false representation of a material fact to obtain workers’ compensation insurance benefits they commit fraud. If a person receives benefits when they are not legally entitled, they’re liable for the overpayment plus interest and workers’ compensation may also order the immediate termination or denial of benefits. However, many fraud cases go undetected, which increases overall costs and premiums.
The best way to minimize employee fraud is through prevention. Follow these tips to help limit your risk and reduce your premiums:
Screen applicants thoroughly – fraud prevention begins with your hiring practices. Your company may want to verify an applicant’s physical condition and their identity and check their criminal record and credit history.
When screening applicants companies need to adhere to civil, state, and federal laws. For instance, in California companies cannot ask potential employees about previous personal injury claims, but they can require a physical examination by a medical professional to evaluate the person’s health.
Many companies understandably want credit reports on applicants when the person will handle finances or work in a security-related position. Businesses must abide by the Fair Credit Reporting Act to obtain this information. This includes providing the potential employee with a clear written standalone document which they sign to grant permission. The person has the right to see the report to review it for incomplete or incorrect information. If your business decides not to hire them based on the information within the report, you must inform them.
Similarly, you must obtain an applicant’s consent before ordering a criminal background check, share the results with them, and provide an opportunity for dispute.
Always seek professional advice from HR or your attorney before making a decision. You have many options if you find a problem on their background check including refusal to hire, job restrictions, increased supervision, or suggesting the applicant applies for another position.
In California, employers may not ask about or consider arrests that did not lead to conviction in their decision. Always review your decision to ensure it meets civil, state, and federal requirements before advising the applicant.
Provide WC training – explain WC to employees, your company’s policy, and the repercussions of fraud. Studies indicate educated employees are less likely to commit fraud when they understand high premiums can cut into employee incentives.
Develop a return-to-work program – let employees know your company will take all measures to get a person back to work as soon as possible. Modify duties whenever possible to reduce the length of claims.
Reinforce company policies – review policies and procedures annually, including workers’ compensation and the implications of fraud. Consistently document incidents, interview witnesses, and investigate all accidents.
Possible Signs of Fraud
Fortunately, most people file legitimate claims. Review the facts carefully before accusing an employee. A false accusation can lead to an employee lawsuit.
Employee fraud falls into four main categories: false claims, exaggerated claims, injuries that occur off the job, and collecting benefits while working. The following may be signs of fraud:
Employee transience – if the employee’s history includes frequent job, provider, or address changes it may indicate an attempt to work the system, especially when they’re difficult to contact.
Multiple WC claims – some people do hurt themselves more often than others, but multiple claims may be a sign something is amiss.
Conflicting or incomplete information – claims without in-depth information or with information that does not support the cause of the injury often indicates you should investigate the claim further. Claims without a witness to the accident are also cause for further investigation.
Claims near employment changes – when employees file a claim after a layoff, termination, strike, or end of season it may indicate further investigation is in order.
Heed the rumors – if rumors of foul play filter through the grapevine, pay attention to them. They are often signs of an invalid claim, so provide a way for employees to report fraud anonymously.
Reporting delay – sometimes employees cannot report an injury immediately, but if they haven’t provided a reasonable explanation it could indicate a fraudulent claim. Also watch for reports filed late on Friday or first thing Monday morning as this may indicate the injury occurred during non-work hours.
Uncooperative employees – employees that refuse medical diagnosis to confirm their injury and workers who refuse a return to work program also merit investigation.
Non-work activities – any recreational activities the worker partakes in that shouldn’t be possible with their injury are definitely worthy of further investigation.
Proper employee screening, continued reinforcement of policies and procedures, and heeding the warning signs of fraud can greatly reduce the occurrence of fraud in the workplace.
If you have any questions or concerns regarding potential workers’ compensation fraud within your business, talk to us. We’re industry experts that can assist you.