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Employer Goes Down for WC Fraud

Happy Friday, dear readers!

Today I bring you the story of Chang Tai Lin, of Salinas, who was recently sentenced for various forms of fraud related to underreporting the number and earnings of his employees to get lower workers’ compensation premiums.

His restaurant, AA Buffet, had more employees than what was reported to his insurers over a span of some six years (2010-2016), and also some of their pay was disbursed in cash to avoid reporting the income.

Here’s the district attorney’s press release.

Fraud is a bad thing, and employer fraud is no exception.  The effect ripples, harming insurers that have to shift the burden not carried by one insured to the others.

But, as clearly illegal as this was, let’s not get all high and mighty just yet.  Mr. Lin was neither the first, nor the only business owner to engage in such conduct.  There are employers who spend some time crunching numbers and come to the conclusion that their business will be in the red if they comply with the laws.  Unfortunately, some of them make the decision to not comply with the law and risk it.  Some of them don’t get caught and are able to undercut their competition on prices.

On several cases, I’ve had the opportunity to discuss this subject with policy holders while preparing the defense of a case.  Business owners, wall-to-wall, have told me about how hard it is to keep the lights on.  Workers’ compensation costs are not the only factor, but they are just another link in the chains weighing down business owners.  Some of them choose to leave California; some of them choose to close up shop and get a day job; and, of course, some employers, like Mr. Lin, choose to break the law.

I have no interest in defending Mr. Lin’s actions or offering justification or excuse.  I do, however, think we as Californians need to be aware that there are no externalities and there are no vacuums.  The economy is an interconnected organism, and when our fellow Californians do things like advocating a yearly depletion of the return-to-work fund  to increase assessments against employers and insurers; turn employers into insurers for the results of pregnancy; or bend the law to provide unnecessary and undeserved benefits to workers who exaggerated their symptoms; the money has to come from somewhere.  That usually means higher prices for consumers, or driving businesses away.

California should be a place where the cost of being a law-abiding citizen and business-owner is low compared to the penalties for violating the law and the odds of being caught.  Instead, the high cost of compliance continues to tempt desperate employers into breaking the law.

Just some food for thought for your weekend, dear readers!

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