WORKERS’ COMPENSATION: Employer Fraud Crackdown
"California has begun random checks of employers to track down those without workers' compensation coverage, part of the state's first systematic effort to reduce workers comp fraud among employers," the Sacramento Bee reports. While the state already performs "some limited checks for workers' compensation coverage," specifically in the garment and labor contracting industries, the new Department of Industrial Relations initiative, entitled "Operation Insure," will cross-check employers' records with those of payroll and insurance companies. Operation Insure's initial stage will target about 1,000 businesses statewide and is expected to last six months. "Hundreds of thousands" more businesses should expect scrutiny thereafter. Officials "will mail out letters to companies that don't have insurance, gently reminding them that they must provide it." If the problem is not remedied, the regulators may fine or prosecute business owners or send their employees home with pay.
The Sacramento Bee reports that the crackdown "comes at a curious time" in that penalties levied "for failing to carry workers' comp insurance fell to 1,406 in 1995 from 2,550 in 1994." State officials, however, have noted studies in other states that show an alarming percentage of employers not abiding by insurance requirements. A recent study in Wisconsin, for example, "showed 40% of new employers there did not have workers' compensation coverage." Further, while workers' comp anti-fraud efforts earlier in the 1990s were mostly directed at "scams by workers, insurance companies, lawyers and doctors," labor representatives have urged that the time has come to crack down on employers. California Labor Federation President Tom Rankin said, "This whole fraud issue was a big thing a few years back but they failed to look at employers' fraud." John Duncan, director of the Department of Industrial Relations, said, "Illegally uninsured employers unfairly put the vast majority of law-abiding employers who comply with California's workers' compensation insurance requirements at a significant competitive disadvantage" (Young, 3/31).