California Investigating How to Combat Workers’ Compensation Fraud
You must understand your legal requirements as an employer. An experienced employer workers’ compensation lawyer can help answer any of your questions about current and proposed laws.
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California Investigating How to Combat Workers’ Compensation Fraud

April 12, 2017
Sacks & Zolonz, LLP
Workers' Compensation Defense

Fraud is a costly and prevalent problem in the California workers’ compensation system. So much so that California legislators, the Department of Industrial Relations (DIR), the Department of Insurance, and the Workers’ Compensation Division have taken aim at this issue repeatedly with legislation and reform efforts. The most recent sweeping legislation was SB 863, passed in 2012 and enacted in 2013.

SB 863 has been delivering well on its goals of keeping employer costs down and providing more benefits to injured workers. But with fraud an increasing issue, governing agencies in the industry are pursuing collaborative efforts to recognize and fight fraudulent workers’ compensation activity. Earlier this year, these agencies provided a Report on Anti-Fraud Efforts in the California Workers’ Compensation System.

Common Fraudulent Activity

Workers’ compensation fraud is perpetrated by parties throughout the system – workers, employers, insurers, medical providers, and lawyers. The public and employers are familiar with employee fraud. These workers fake injuries and disabilities, or milk the system by exaggerating the extent of their injuries. Less well known is premium fraud, which refers to employer efforts to defraud the system through payroll under-reporting, employee misclassification, and deceptive low-risk occupation reporting.

But what’s really been on the rise and drawing increased attention in California is medical provider fraud. Several recent conspicuous criminal cases have come to the forefront, seeking to convict medical workers’ compensation providers for their participation in treatment kickback and referral schemes that have cost the system, employers, and insurers untold sums of money.

These schemes include excessive lien filings against employers and insurers for employee medical treatment bills. Analysis has found that a mere 10 percent of all these filers represented three-quarters of all the lien claims filed in 2013, 2014, and 2015.

Proposed Recommendations

DIR has recognized areas where anti-fraud efforts may be effective, including administrative tasks, judges, system usage reporting, data sharing, and the creation of an anti-fraud support unit. This unit will track and research fraud within the system and act as the central point of contact for all workers’ compensation fraud issues.

New legislation is also proposed to establish the DIR Anti-Fraud Support Unit. And amendments to the Labor Code, Insurance Code, and Unemployment Insurance Code are recommended to address payroll underreporting and worker misclassification fraud.

The DIR has also asked for consideration of a change to the statute of limitations for workers claiming cumulative trauma injuries after they’ve separated from their employment. Some technical changes to this year’s new laws – SB 1160 and AB 1244 – are recommended as well.

If put in place, these changes may be instrumental in combating fraud in the workers’ compensation system and saving millions of dollars. However, new legislation may be confusing for employers. It’s imperative that you understand your legal requirements as an employer. An experienced employer workers’ compensation lawyer can help answer any of your questions about current and proposed laws

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