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Bay Area construction firms charged with work comp fraud

Despite the economic uptick in California, workers’ compensation fraud appears to be a persistent problem. A number of our posts have highlighted this issue, including the federal indictment of a state senator who took bribes in exchange for his influence in thwarting a bill that would have closed a loophole.

In light of the problem, prosecutors across California appear to be cracking down on employees and employers who commit fraud. Two San Francisco Bay Area construction companies are examples  of employers being held accountable. 

Santa Clara County prosecutors are charging them with felony workers’ compensation fraud. The construction companies are accused of intentionally underreporting the number of employees they have to insurance companies in order to pay less in insurance premiums.

California law requires all employers who have employees to carry workers’ compensation insurance. The more employees an employer has, the more the insurance premiums will ostensibly be.  Because competition for construction jobs can be quite stiff, it may be difficult for companies that play by the rules to compete on price. As such, prosecutors appear intent on aggressively prosecuting employer fraud.

It also appears that employee costs are leading to changes with how independent contractors are being used, and employers may not understand the limitations and differences between ICs and full-fledged employees. Because of this, it is prudent to have a relationship with an experienced attorney who can advise businesses so that they can avoid the possibility of being charged with a crime.

In the meantime, the principals of the construction companies charged face long prison sentences and payment of restitution if convicted. 

Source: Workerscompensation.com “ CA Construction companies charged with workers’ comp fraud,” April 21, 2014

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