Employer Fraud: Cheating Doesn’t Win

A common device used by unscrupulous employers in attempts to reduce their compensation premiums is classifying work into jobs with lower manual rates. Responsible employers, also, may be tempted to classify borderline jobs into lower classifications.

Though this seems like a nifty trick, it usually backfires and results in higher premiums. Once a job is classified in a category with a lower manual rate, the employer’s actual safety performance will be matched against the performance of all companies whose employees really do work in the less dangerous classification. In the end, the cheater’s safety performance will be worse than others’ in the classification, and its resulting X-Mod will be much higher than had it properly classified the work.

Employee Fraud: Less Common Than Thought

Complaints about employee fraud circulate among employers. Two varieties are often cited. In one, employees exaggerate the extent of their injuries in order to remain off work longer while drawing compensation from insurers. In the other, workers near the end of a job, who do not have immediate prospects of new employment, fake injuries and file false claims so they will have income while they job hunt.

Two recent reports document the extent of employee fraud. In a 1999 analysis, the State of Wisconsin reported that of 65,000 annual lost-time injuries from 1994 to 1998, only 15 fraud allegations were reported to district attorneys for prosecution. In the other study, the California Department of Insurance Fraud Division reported 1000 referrals per quarter from an average of 70,200 lost-time injury claims. In both states, the conviction rate was less than a tenth of a percent.

[Steve Clark]