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How Employers Try to Avoid Paying Workers’ Compensation Premiums

How Employers Try to Avoid Paying Workers’ Compensation Premiums

When you hear about workers’ compensation fraud in Louisiana, it usually involves a worker collecting benefits when he or she should not have. But did you realize that employers can commit a type of workers’ compensation fraud as well?

In most cases, employers must provide workers’ compensation insurance to employees. There are some exceptions, but that is the rule in most cases. If they fail to do so, your employer may be in violation of Louisiana workers’ compensation laws. Since many employers cannot avoid paying these insurance premiums, they may try to reduce these costs instead. However, this could reduce or eliminate your workers’ comp benefits. Here are some of the ways your employer might be committing workers’ compensation premium fraud.

Why Would My Employer Commit Workers’ Compensation Premium Fraud?

In an effort to save money, some business owners will fraudulently avoid paying their workers’ compensation insurance premiums. This can lead to workers getting smaller workers’ comp payments or no benefits at all. Here are a few of the methods employers use:

  • Misrepresenting the Business – Certain businesses have higher workers’ compensation premiums than others. Businesses where employees file claims more often could pay higher rates. Businesses involving higher risks could also pay higher premiums. This sometimes leads employers to lie about their business and the number of injury claims filed against them.
  • Inaccurate Payroll – Some employers commit workers’ compensation premium fraud by reporting fewer employees. This policy-related fraud can result in lower premiums. However, the penalties are stiff. After a criminal investigation, there could be fines or even jail time.
  • Misclassifying Employees – Employers pay less to insure certain workers. Businesses also do not have to insure independent contractors at all. This leads some businesses to classify employees as contractors, though they are not. Employers may even claim that certain employees have a low-risk job to avoid premiums.

What Is the Most Common Workers Compensation Fraud?

A study by the Economic Policy Institute suggests employers misclassified 15 to 20 percent of U.S. workers. A study in Louisiana found that 865 companies misclassified almost 9,400 employees as contractors. It is an unfortunately common problem. A worker is usually an independent contractor if:

  • the payer controls the result of the work but not how the worker does it
  • the worker provides their own specialty tools and training
  • the payer cannot set the worker’s hours
  • the worker does not have to work exclusively for the payer

Contractors also bear most of the financial risk for their work. If a job is not done, they do not get paid. Employees are often paid regardless of the outcome of their work.

Employees are:

  • Trained at the expense of their employers
  • Generally cannot work for the employer’s competition
  • Are usually scheduled to work certain hours
  • Are usually paid regularly (weekly, bi-weekly or monthly)

For more clarification, check out this definition of an independent contractror from the IRS.

How Do I Tell If My Employer Is Avoiding Paying for Workers’ Comp Insurance?

Figuring out if your employer is committing workers’ compensation premium fraud can be difficult. In some instances, businesses may not even know they are committing this crime. This is why consulting the Louisiana Workforce Commission can be a step in the right direction.

Need Help With Your Work Injury Claim?

Our skilled New Orleans workers compensation attorney is dedicated to protecting your rights as a worker. Here at Mitchell & Associates, APLC, we fight to get your family the compensation they need when you have been hurt doing your job. If you are 2 hurt 2 work, we are ready to help. Send us an online message or give us a call at 504-226-6530. We also have an office in Baton Rouge for your convenience.