Last week, two California businessmen were arraigned on multiple felony counts including workers’ compensation insurance fraud, grand theft, and tax fraud. The associates allegedly underreported over $29.2 million in payroll to reduce workers’ compensation expenses. In another instance last month, the owner of a California trucking company—TKJ Trucking—was arraigned on three felony counts of workers’ compensation fraud following the death of a truck driver. The owner, Heigo Kubar, allegedly underreported $2 million in payroll to save on workers’ compensation.
These two fraud events illustrate the fragility of the workers’ compensation system—employers, employees, and providers are all susceptible to pressure and capable of deceit. It may come as a surprise that workers’ compensation fraud does not just entail employees manufacturing or manipulating injuries or sickness for personal gain, but actually more often consists of employers strategically circumventing rules and regulations to avoid greater liabilities.
What does employer workers’ compensation fraud actually look like?
In the case of the two California businessmen, Ruben Perez Mireles Jr. of Clovis and John Mena of Lemoore, it involved underreporting $7.6 million in employee payroll to his insurance carrier then forming a separate company to shift another $8.8 million in employee payroll to avoid increased workers’ compensation premiums.
In the case of Heigo Kubar and TKJ Trucking, it involved misclassification of employees. One such employee was the deceased driver whose death sparked the inquiry. During the Central Valley Workers’ Compensation Fraud Task Force investigation, officials found that Kubar reclassified the employee’s job from truck driver to salesperson shortly before his death. Less than a month after the employee’s death, Kubar reversed the change.
According to Insurance Journal, “An investigation led by the Fresno County District Attorney’s Office found the dead employee was working for TKJ Trucking as a truck driver for roughly 15 years. At the time of death, the cost to insure a sales person was roughly $1 for every $100 in payroll, but the cost to insure a truck driver was roughly $20 for every $100 in payroll.”
In Georgia, the law requires business owners to carry workers’ compensation insurance if they have three or more employees. Even if employers do meet that threshold, and therefore carry workers’ compensation insurance, only workers classified as employees are entitled to coverage. Employers misclassify employees as independent contractors (and in some cases, owners) to avoid payments.
In 2015, the Economic Policy Institute reported that between 10–20 percent of employers misclassify at least one employee as an independent contractor. According to a 2020 report by the National Employment Law Project, “rates are disproportionately high in certain industries, such as construction, real estate, home care, trucking, janitorial, hi-tech, and the rapidly growing app-based economy.”
Employers who commit fraud benefit enormously by not having to pay the premiums, but ultimately do great harm to individuals injured and in need of workers’ compensation. If you suspect your employer is engaging in fraudulent practices to avoid providing workers’ compensation coverage, contact an attorney. With over 20 years of experience in workers’ compensation, Julie Poirier of Poirier Law Firm can help you get the care, consideration, and compensation you deserve.