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Grand Jury Suggests Changes to Prevent Workers Compensation Fraud

by | Mar 26, 2014 | Workers' Compensation

The New York State Supreme Court Grand Jury recently issued a report examining the New York worker’s compensation insurance system and the potential for fraud and misuse. The Grand Jury issued their report after the District Attorney’s Money Laundering and Tax Crimes Unit investigated the origin of false information provided to the New York State Insurance Fund.

The New York Workers’ Compensation Law was created to provide for employees that are injured in the workplace. The program also protects employers from potential lawsuits, as they use the insurance to pay out the costs of injury to harmed employees. The New York State Insurance Fund handles about 40% of all worker’s compensation insurance accounts, and the worker’s compensation insurance business generates about $6 billion per year.

Recently, the Manhattan District Attorney’s Office was made aware of insurance premium fraud that has been permeating the worker’s compensation insurance industry. This fraud gives insurance companies a competitive advantage over other businesses. At the same time, it deprives workers of needed protections and benefits in the event of an injury. The New York laws mandate that every employer in the state obtain worker’s compensation insurance in order to hire employees. The New York Compensation Rating Board determines the individual employer’s premium.

The rates also vary depending on the safety risks at the business. A safe job in an office will inevitably have a lower rate than the rate for an employer at a construction site. Some employers will misclassify employees so that they can reduce the rates that they have to pay on worker’s compensation insurance. For example, an employer can list an electrician as a secretary, or report that a construction worker is really a blueprint designer in the office. This can lower the premium significantly, but it can cause serious issues if an employee happens to be injured on the job.

Investigators believe that the New York City construction industry in 2011 cost the City and State about $500 million based on worker misclassifications. When employers misclassify their employees, it results in catastrophic issues that can damage not only the employee but also consumers and taxpayers.

The Manhattan District Attorney’s Money Laundering and Tax Crimes Unit has recovered approximately $4.8 million from criminal defendants who have pleaded guilty to violating worker’s compensation laws. Still, the Grand Jury thinks that more needs to be done. The Grand Jury suggests that there are:

  • Increased penalties
  • Increased transparency
  • Broader data collection and collaboration
  • Broader education for employees

The grand jury hopes that these suggestions will be implemented to help improve the workers’ compensation system in New York City and protect workers. At Katz Leidman Grossman Wolfe, & Freund, we are impressed with this report and hope that it will reduce employer abuse of the worker’s compensation system.

If you have been injured in a New York work accident and are seeking a settlement based on your workers’ compensation, don’t hesitate to contact a New York workers’ compensation attorney at our firm today. With the right lawyer on your side, you can argue for your rightful compensation after an injury. Don’t hesitate to talk with our professional team to get more information about the Grand Jury’s decisions and how worker’s compensation insurance fraud may be affecting your ability to achieve the compensation you deserve!