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California employer sentenced for workers' compensation fraud

Under California law, employers are required to maintain workers compensation insurance for all of their employees. In order to determine the insurance premiums, the employer must submit payroll records for all of their employees both to the worker's compensation insurance company. Based on the number and type of employees, along with each individual company's history of injury claims, the insurance carrier will determine the premium.

It is considered workers' compensation fraud to intentionally misrepresent the number of your employees, the type of work performed, the amount of your payroll or your claims history. In other words, it is fraudulent to pay employees "under the table" in cash .

If employers were allowed to operate that way, it would artificially reduce insurance premium rates, giving them an unfair advantage in the marketplace .

The more important reason against paying employees in cash is that employees will not be insured. This places employees at risk if they are injured on the job, but then are not allowed to collect workers' compensation benefits.

An employee who is injured at his job will need this financial help to survive after an accident. When a claim is made, the business will open itself up to investigation into possible fraud. It is also important for California employers to consider that, even if an injury does not occur, it can still come under investigation. This will places the employer at risk for charges of workers' compensation fraud, which carry with them serious consequences, including fines and jail time.

Take for example the president of a California roofing company. Relying on information from a tipster, the San Bernardino County District Attorney's office began an investigation into the roofer last year.

Investigators were told that the company was under-reporting payroll and employees. In February of 2010, a search warrant was issued to search the business for incriminating evidence.

The investigators alleged that the employer did pay at least one employee in cash. They also accused the employer of misrepresenting the number of employees in order to receive a lower workers' compensation premium.

Last month, the employer was ordered to pay $15,000 to the California Department of Insurance, along with $670 in restitution to the State Compensation Insurance Fund. In addition, he was sentenced to probation which is fortunate because workers' compensation fraud charges generally carry with them consequences of possible jail time.

Source: Inland Valley Daily Bulletin, "A man sentenced for workers compensation fraud," Jannise Johnson, Oct. 7, 2011

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