Home > Uncategorized > Employer Goes Down for WC Fraud; Lied About No. of Employees and Payroll

Employer Goes Down for WC Fraud; Lied About No. of Employees and Payroll

December 11th, 2013

Jack sat in his office, high above his warehouse floor, where his insurance agent, Mark, explained to him why his workers’ compensation insurance premium was so high.  Jack understood that certain classes of employment increased his costs for insurance, as did the number of employees he had.

So, if he had fewer workers, and they were all clerical workers, he was likely to have a lower premium than if he had more workers doing hazardous work.

So, naturally, Jack decided that he would tell Mark he had five employees (not 25), and they were almost all office workers.

Mark looked out the window and saw the two dozen warehouse employees picking up heavy items and loading them into trucks before driving off to make deliveries.  “Yeah, you’re going to need to find a new insurance agent… this looks like fraud.”

Your humble blogger has a few friends in the insurance industry, and this happens more often than I would like to believe.  A lot of business owners are trying to make ends meet, and they often have to choose between lying about how much coverage they need to have or operating without coverage at all.

We’ve seen it on this blog several times, often with disastrous results for the employer, the injured worker, the injured worker’s family, and all the tax payers and policy holders who had to pick up the slack.

Well, enter now, the story of Richard Lopez Escamilla, Jr., who last week was sentenced to six years in prison for one felony count of insurance fraud, and was ordered to pay restitution in excess of $4 million to SCIF and SeaBright Insurance.

Apparently, Mr. Escamilla lied to his insurers about the number of employees he had, their payroll, and the history of past injuries.

As a result, he paid lower premiums and had an economic edge over his competitors (at least the ones that weren’t doing the same thing).

Look, if you’re an employer, this is not what you want to do.  It’s tempting to cut corners, especially after the sticker shock of your workers’ comp premium.  But, at the same time, you’re going to have a hard time running your business from behind bars, and a fraud conviction is not something anyone forgets about.

That being said, let’s not forget what is driving businesses to these methods in the first place.  We can shake our heads at these evil businessmen who don’t care about their employees and just want to squeeze another dollar out of the working man.  Or we can recognize that these employers are taking great personal risks to continue providing employment to people that need it, and that often have to choose between closing their doors or rolling loaded dice.

Remember, folks, we don’t ask the employees if they want to be covered by workers’ comp, or if they would rather have a higher paycheck (or even a job, in some cases).  We tell the worker he has to take the coverage, and we tell the employer he has to provide it.  No one cares if there is a better solution out there.

But, then again, that’s California.

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