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Worker’s Compenstation Fraud By the Numbers

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CONTENT PROVIDED BY THE NEW YORK ALLIANCE AGAINST INSURANCE FRAUD

• Some businesses illegally try to avoid paying full state-required workers compensation premiums. One scheme involves paying workers off the books because the number of employees is a factor in determining a business’s premiums. Another scheme involves misclassifying employees in high-risk jobs as holding lower-risk jobs.

• The number of employees misclassified by employers increased from 106,000 workers to more than 150,000 workers between 2000 and 2007. This is a conservative figure because states generally audit less than two percent of Employers a year. (U.S. Government Accountability Office, 2009)

• At least 50,000 construction workers in New York City — one of four -are paid off the books or misclassified as independent contractors. (Fiscal Policy Institute, 2007)

• Those schemes stole $489 million in workers compensation premiums, taxes and other expenses in 2005. That figure could reach $557 million in 2008. (ibid)

• More than 39,500 employers misclassify 704,785 workers — or 10.3 percent of the workforce — throughout New York State each year. (Linda H. Donahue, James Ryan Lamare, and Fred B. Kotler,Cornell University, 2007)

• In construction, 45,474 workers — or 14.8 percent of New York’s workforce — are misclassified as independent contractors. (ibid)

• Employers in high-risk California industries may hide up to 75 percent of their payroll — or $100 billion — for the most-dangerous jobs. This forces honest employers to pay workers comp premiums as much as eight times higher than if everyone paid their fair share. (Frank Neuhauser and Colleen Donovan, University of California-Berkeley, 2007)

• Every $1 invested in workers compensation anti-fraud efforts has returned $6.17, or $260.3 million total in 2006-2007. (California Insurance Department, 2007 annual report)

• Workers comp insurers in Massachusetts lose $100 million a year in unpaid premiums to businesses that illegally pay workers cash under the table or falsely label employees as independent contractors. (Social and Economic Costs of Employee Misclassification in Construction, Harvard University, December 2004)

• As many as one of seven construction workers in Massachusetts is hired off the books or illegally classified as independent workers. (ibid)