North Carolina Workers’ Compensation Fraud – It’s not all Employees

In North Carolina, Workers’ Compensation Fraud is not just about employees filing fraudulent claims.  An even bigger problem is Employers that are misclassifying employees as 1099 workers instead of payroll workers.

Thanks to Leonard Jernigan for sharing the following video during his presentation on Workers’ Compensation fraud during the second day of the Workers Compensation Annual Meeting in Greensboro, NC.

I hear all the time how frustrated the general public is with workers that file fraudulant claims, and get benefits for free when they should actually be back at work.  But what the general public doesn’t fully understand is that employers are every bit as responsible for workers compensation fraud in North Carolina, and ultimately cost the taxpayers and workers much more with their fraudulent activities.

Here are some startling statistics that were provided by Mr. Jernigan this morning: In Texas in 2005, employee fraud cost $446,826, while EMPLOYER fraud cost $12 MILLION dollars, and in New York, a Fiscal Policy Report issued on January 25, 2007 concluded that 25-30% of all companies in New York were not purchasing workers’ compensation insurance.

Another type of Workers Compensation Fraud that is referenced in the video above is 1099 misclassification, and this is a problem countrywide.  What happens in these situations is workers are classified as 1099 independent contractors instead of payroll employees.

By doing this, the employer obtains a competitive advantage over other employers that are playing by the rules.  Here are some of the reasons:

  • By classifying their employee’s as 1099 independent contractors, they alleviate themselves of the legal need to purchase workers compensation insurance for their workers;
  • They are not required to pay unemployment premiums or payroll taxes such as social security and medicare;
  • If a worker gets injured, medicaid, medicare and social security foot the bill, instead of the employer;
  • They are not required to provide other benefits to the workers, such as health insurance, retirement plans, etc.

Of course, this is a huge problem across the country.  But you can assist in fighting this problem.  If you are a worker in North Carolina, and you believe your employer is engaging in fraudulent practices, or you are being misclassified as a 1099 independent contractor rather than an employee, then you can contact the NC Department of Insurance at (919) 807-6840 or the North Carolina Industrial Commission at (888) 891-4895.

For more information on Employer Insurance Fraud visit The Jernigan Law Firm – Fraud Reports.