Are You Committing Worker's Comp Fraud?

Worker's compensation insurance is an expensive cost of doing business and most contractors are always looking for ways to reduce that financial burden

January 27, 2016
Silhouette behind jail cell bars

Some strategies are legitimate—like using a split-classification system (in state's that allow it) for employees whose daily routine involves them in several kinds of tasks. But far too many contractors cut corners in ways that amount to outright fraud. An article at by Kim Slowey points to several common ways contractors commit worker's comp fraud:

  • Paying cash under the table to reduce the total payroll on which worker's comp premiums are based;
  • Treating workers as independent subcontractors when they actually meet the criteria for employees;
  • Setting up shell companies that look like small sole proprietorships during insurance audits.

In the past, insurance companies conducted most investigations into worker's comp fraud, but now state agencies are getting involved directly, Slowey reports. Regardless of who uncovers the fraud, the consequences will almost certainly include payment of unpaid premiums plus interest and fines, and in extreme cases can result in jail time.



Every year, we go through a worker's comp audit. Year after year, I have to fight with the insurance company to complete it accurately with split-classifications as our state allows. What is most frustrating is that I know that competing companies do these very things to avoid paying worker's comp which allows them to under bid us.

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