Workers Compensation Fraud

What Constitutes "Workers’ Compensation Fraud" in California?

California's state-run workers' compensation insurance program is designed to compensate workers injured on the job site or while performing job-related duties elsewhere. It is meant to provide assistance for both medical care connected with the job-related injury as well as make up for lost income, to a degree, and thus help struggling families make it through a difficult time.

Any time a worker submits a claim for benefits they are not entitled to under the provisions of California's workers’ comp laws, knowingly presenting false, incomplete, or misleading information so as to defraud the workers’ comp system and secure financial benefits to themselves, that is workers’ comp fraud. It is also possible for employers to commit workers’ comp fraud by lying in order to wrongfully deny rightful benefits to an injured worker.

There are several different statutes that address workers’ comp fraud in California. These are as follows:

1. Insurance Code Section 1871.4

This is the most important anti-fraud statute concerned with the workers’ comp system in California. It covers the following types of fraud, all focused on employers fraudulently denying benefits:

• Preparing or having another prepare for you a false or otherwise fraudulent statement for the purpose of wrongfully denying workers’ comp benefits to an injured employee. 
• Assisting or conspiring with one or more other people to wrongfully deny workers’ comp benefits to an injured employee.
• Making a false statement verbally or in writing in order to intimidate or discourage someone rightfully entitled to workers comp benefits from even trying to collect them.
• Lying to an insurance company concerning how many people you employ, what are the true duties of a particular employee, or about the workplace conditions that prevailed when an injury occurred on the job site.

2. California Penal Code Section 550

In this statute, a number of types of workers’ comp fraud that employees can commit are criminalized. As workers’ comp benefits are partly paid by covering medical expenses, Penal Code section 550 also applies to health care fraud. The statute addresses:

• Preparing or causing to be prepared for you a fraudulent claim for the purpose of receiving a workers’ comp benefit that covers a medical expense.
• Purposefully submitting a workers’ comp health care claim for a medical service that was never used.
• Intentionally submitting two or more claims for a single health care expense covered by workers’ comp insurance.

Also note that health care providers can commit this class of workers’ comp fraud by independently submitting false claims or by conspiring with a workers’ comp beneficiary to do so. Physicians and other medical workers who commit worker’s comp or other health care fraud are liable to lose their licenses either temporarily or permanently.

3. California Penal Code Section 549

Penal Code section 549 addresses forms of workers’ comp fraud that are often filed against doctors and involve commercial bribery or "kick-backs," besides direct financial benefits. Penal Code section 549 criminalizes knowingly accepting business from those whom you know or ought to know intend or likely may intend to commit workers’ comp fraud. 

What Must the Prosecution Prove?

To gain a conviction on charges of workers’ comp fraud, prosecutors must establish:

• That a false, incomplete, or misleading claim was submitted to the workers’ comp insurance system by the defendant.
• That the defendant was aware of the nature of the claim as false or otherwise fraudulent.
• That the defendant had an intention of deriving financial gain from the fraud claim by defrauding the workers comp program of undeserved benefits.

Benefits can include: immediate and ongoing medical care, temporary disability payments to cover lost wages while recovering, permanent disability benefits for those permanently unable to work due to the job-related accident, and death benefits to the families of those killed in a work-related accident.

The prosecutor will have no interest in trying to show that the workers’ comp beneficiary lied about who caused the accidental injury or death because California workers’ comp insurance is a no-fault system. However, there could be fraudulent claims based on the location of the injury, since it needs to have taken place on the job site or at least while performing job-related duties.

The statements at issue can include both information made on the workers’ comp claim application form or made orally in the interest of securing a claim. It can also include supporting evidence, such as medical bills, hospital records, X-ray results, and proof of lost income.

The statement(s) in question can be fraudulent for a variety of reasons, including: 

• The injury is fake.
• The injury is not work-related.
• The injury was not as severe or costly as represented.
• A previous injury was not disclosed.
• Previous claims filed were not disclosed.
• The same claim was filed under multiple employers.
• The defendant worked while collecting workers comp benefits.

Most critical to many workers’ comp fraud cases will be the issue of intent and of whether a false statement was material. To be convicted of workers’ comp fraud, you must have had an intention to defraud rather than simply make a mistake. And any false statements, even if knowingly made, must be such as would affect the approval or amount of a claim.

Possible Penalties for Workers Comp Fraud

For the most part, workers’ comp fraud in California can be filed as either a misdemeanor or a felony, depending on the facts of the case, the monetary value of the claim(s), and the defendant's prior criminal history, if any. 

In general, misdemeanor-level workers’ comp fraud can get you up to 12 months in jail, while felony-level worker’s comp fraud is punishable by 2 to 5 years in prison and heavy fines.

However, the penalties vary based on which statute was broken, as follows:

1. Insurance Code 1871.4 Violations

Generally committed by employers, these acts of fraud are punishable as a misdemeanor by:

• Up to 12 months in county jail.
• Summary probation.
• Full restitution.
• A fine of $150,000 OR of twice the amount of money defrauded, whichever is greater.

As a felony, Insurance Code 1871.4 is punishable by:

• 2 to 5 years in county jail.
• Formal probation.
• Full restitution.
• The same fine as when charged as a misdemeanor.

2. Penal Code Section 550 Violations

These are generally committed by workers but can also be committed by health care professionals. As a misdemeanor, PC 550 convictions can be punished by:

• Up to 12 months in jail.
• Summary probation.
• A maximum fine of $10,000.

As a felony, PC 550 is punishable by:

• 2 to 5 years in jail.
• Formal probation.
• A fine of $50,000 or twice the amount of the fraud claim, whichever amount is greater.

Note that Penal Code section 550 is always charged as a misdemeanor if the amount of the fraud claim(s) within a 12-month period is $950 or less. In this case, the punishment is reduced to 6 months in jail and a $1,000 fine. Fraud claims exceeding $950 can be charged and punished as either misdemeanor or felony as outlined above.

3. Penal Code Section 549 Violations

These crimes are generally committed by health care professionals. They are punishable, when a misdemeanor, by:

• Up to 12 months in county jail.
• A fine of $50,000 or double the amount of the fraud claim, whichever is greater.

When charged as a felony, PC 549 violations are punishable by:

• 16 months to 3 years in jail.
• The same fine as for the corresponding misdemeanor charge.

Professional Discipline

Workers’ comp fraud, when committed by health care professionals, will lead to professional discipline on top of the applicable penalties mentioned above.

When a doctor, nurse, pharmacist, or other health care worker commits fraud in order to secure financial gain, it is considered "substantially related to" their basic qualifications as a health care professional. Thus, professional licenses of these practitioners can be revoked or suspended permanently or for a specified period of time due to a workers’ comp fraud conviction. 

Civil Penalties

Besides the incarceration terms and fines you can be sentenced to under criminal law for a workers’ comp fraud violation, there are also civil fines that may apply.

In most instances, the very same criteria that leads to a criminal conviction for workers’ comp fraud will also expose you to the following civil fines:

• A fine of from $4,000 to $10,000 per fraudulent claim submitted.
• A fine of as much as triple the amount workers comp insurance paid out for medical and/or legal expenses on a fraud claim(s).
• For those who have prior conviction under PC 549 or Insurance Code 1871.4, an extra $4,000 per service paid for by means of a fraud claim.

Possible Defense Strategies

At the Criminal Law Office of Leah Legal, we understand that government agencies, police, and prosecutors are especially alert to suspected workers’ comp fraud, due to the fact it is a large and fast-growing class of California insurance fraud. We also understand their motivation to protect the taxpayer and those whom the California workers’ comp program is meant to benefit.

However, there are also many false or exaggerated allegations of workers’ comp fraud filed in California every year. The complexity of the system often leads to simple mistakes being made, which are sometimes assumed to be fraud.

We are just as vigilant in defending our clients against the charge of workers’ comp fraud as prosecutors are of seeking a conviction. Here are some of the defenses we commonly use to win workers’ comp fraud defense cases:

1. Lack of Knowledge

It may be that, especially as secretary or other assistant, though you prepared documents that were in fact fraudulent, you were not at all aware of their being fraudulent. Nonetheless, you can be charged with fraud along with your employer or other party that actually committed the fraud. In this case, Leah Legal will fight vigorously for an acquittal or a dismissal of the case brought against you.

2. Lack of Intent to Defraud

Often, even if you are the one who knowingly submitted a claim containing false or misleading information, you may not have had any intention of defrauding workers’ comp. It may have simply been a mistake on your part. This kind of human error is not at all uncommon, and a good defense attorney can likely prove your innocence.

3. Fraudulent Information Not "Material"

Even if you knowingly submitted false information on a claim application to workers’ comp, if that information was not material (relevant) to getting a claim or increasing the amount of the claim, then you cannot be convicted of fraud.

4. Insufficient Evidence to Convict

In many cases, the evidence brought against you may be very complex and hard to decipher. It may seem impressive by its sheer volume, but in point of fact, it may not meet the burden of proof.

Contact Our Criminal Defense Attorney Today For Help

At Leah Legal Criminal Defense, we have the expertise and the grit and determination to fight both skillfully and tenaciously in your best interests if you have been accused of committing workers’ comp fraud. We know how to secure a dismissal or an acquittal where possible and how to negotiate a favorable plea agreement with a reduced charge/sentence where necessary.

For a free consultation and immediate attention to your case, do not hesitate to our criminal attorney anytime 24/7/365 at 818-484-1100.