Impact of Workers’ Compensation Fraud on Employers in California
Workers' compensation fraud in California can lead to increased insurance costs, decreased employee morale, reputation damage, and heightened scrutiny for employers.
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How Workers’ Compensation Fraud Can Negatively Impact an Employer in California

February 15, 2023
Sacks Law Group, APC
Workers' Compensation Defense

If you’re an employer in California, you must offer your employees workers’ compensation insurance. The law requires it.

Unfortunately, some employees may attempt to commit workers’ compensation fraud by falsely claiming that they were injured on the job. This type of fraud, when successful, can have a negative impact on employers in California for a variety of reasons. This overview will cover some noteworthy examples.

Increased Insurance Costs

One of the primary ways in which workers’ compensation fraud can negatively impact an employer in California is through increased insurance costs. When an employee files a fraudulent workers’ compensation claim, the employer’s insurance premiums may increase. This can be particularly challenging for small businesses, which may have limited resources to absorb the additional costs.

Decreased Morale

Workers’ compensation fraud can also have a negative impact on employee morale. When employees perceive that their co-workers are committing fraud, it can create a sense of distrust and suspicion in the workplace. This can lead to decreased morale and productivity, as employees may feel that their hard work is being undermined by fraudulent behavior.

On the other hand, if fraud is successful, employees might be under the impression that the one who committed fraud was genuinely injured on-the-job. This can still negatively impact morale by giving employees reason to assume the same might happen to them.

Reputation Damage

Workers’ compensation fraud can also damage an employer’s reputation. If an employer is associated with fraudulent behavior, it can create a negative perception among potential customers or clients. This can make it difficult for the employer to compete in the marketplace, and can result in lost business.

Increased Scrutiny

When an employee files a workers’ compensation claim, the employer’s insurance provider may investigate the claim to determine whether it is legitimate. If an employer has a history of fraudulent workers’ compensation claims, they may be subject to increased scrutiny from their insurance provider. This can be time-consuming and stressful for the employer, and can lead to increased insurance costs and decreased morale.

Preventing Workers’ Compensation Fraud

To prevent workers’ compensation fraud, employers in California can take a number of steps. These include:

  • Educating employees about workers’ compensation fraud and the consequences of committing fraud.
  • Encouraging employees to report fraudulent behavior if they witness it.
  • Establishing clear policies and procedures for reporting and investigating workers’ compensation claims.
  • Conducting regular training for managers and supervisors to help them identify and prevent fraud.
  • Partnering with an experienced insurance provider that can help identify fraudulent claims and provide guidance on how to prevent fraud.

Of course, as an employer, you likely want your employees to receive the workers’ compensation benefits they genuinely deserve if they’ve actually been injured in the workplace. However, if you have good reason to suspect an employee is attempting to commit fraud, it may be best to deny their claim.

An employee trying to commit fraud might fight back when this happens. If they do, it’s important to have a strong defense.

At Sacks Law Group, APC, that’s precisely what we offer. To learn more about what our Los Angeles workers’ compensation defense attorneys can do for you, contact us online or call us at 310-216-7778.

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