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Avoid workers' compensation fraud: know the rules

A search warrant to obtain paperwork from a restaurant in California was executed in June 2013. A thorough investigation followed and revealed that the owner had falsified the records of the restaurant. The man was charged with 16 misdemeanor and felony counts, including alleged workers' compensation fraud, payroll tax fraud, violations regarding minimum wage as well as overtime premium and the dissuading of a witness.

Revealed by the investigation were falsified payroll journals, time sheets, log sheets and audits. Six to 12 people total were shown in the records to have been employed while, in fact, there were 60 people employed since 2010. The man only declared wages of $25,000 to $45,000 per quarter, based on only those six to 12 workers. Thousands of dollars in workers' compensation were never submitted.

The workers were interviewed and revealed that their duties covered shifts of 12 to 13 hours, with no meals or rest for six days per week. Some employees received no money other than tips from customers, while others received their monthly wages in cash directly from the restaurant owner. The audit, done by DLSE, revealed that $520,000 accumulated as unpaid minimum wages and $550,000 were due to employees in lieu of overtime. In addition, there was another $191,000 necessary to compensate for no meals and no rest periods allowed. The state labor commissioner stated that cases like this one send clear messages that it is a crime to commit wage theft, and prosecution will follow.

Employers who commit workers' compensation fraud can face serious consequences, including significant fines and jail time. Employers can be accused of illegal activities that include avoiding having to pay for workers' compensation insurance or avoiding paying out claims. Business owners in California may want to expand their knowledge regarding these legal matters. Once employers understand what is required and regulated by the California workers' compensation system, they can be better equipped to protect themselves from workers' compensation fraud allegations.

Source:, Restaurant owner violates worker's rights and charged with fraud, No author, Nov. 21, 2013

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