Are you at risk for small business work comp fraud?

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Learn the signs of small business work comp fraud and precautions to take

  1. Workers’ compensation fraud costs $6-7 billion per year. And that’s not just mega-corporations, but small businesses, too.
  2. Work comp fraud can be committed by an employee, an employer or a health care provider.
  3. Learn the red flags of possible fraud.
  4. Take precautionary steps to ensure that small business work comp fraud doesn’t happen to you.


A worker’s compensation policy protects your small business – and your employees – in case of workplace injury or illness. Health care costs can be a huge financial burden, and your policy typically covers not only medical expenses, but also loss of income, retraining, permanent injury and survivor benefits. But what happens when you think you’ve encountered a small business work comp fraud scheme?

Workers’ comp insurance fraud costs $6-7 billion each year. Besides rising health care costs, it’s one of the key reasons work comp premiums continue to rise. That’s why it’s so important that small business owners recognize the red flags of workers’ comp fraud and take precautions to help protect their small business.

An employee may commit small business work comp fraud by lying about when and where an injury occurred. For instance, Jeff played touch football last weekend and injured his ankle. He hobbled into work Monday and then pretended to fall in your warehouse. Or Jill injured her wrist snow skiing over the weekend, came into the office, then claimed a work-related injury on that wrist.

When an employee has a true injury and goes to a clinic, it’s also possible that small business work comp fraud can be committed by a health care practitioner who fraudulently bills for services or performs unneeded services in order to collect higher insurance payments.

But for purposes of this article, we’re zeroing in on workers’ comp fraud by employees – and what you can do to protect yourself and your business.

Related: Workplace safety reward programs help stop accidents before they start


Preventing small business work comp fraud

How can you as a small-business owner reduce the risk of workers’ compensation fraud? Start with these steps:

  • Screen applicants thoroughly. Red flags: The person is a job hopper or has a work history riddled with holes; the applicant has a child support lien or an extensive criminal record.
  • Be sure to spell out to all applicants the physical requirements and hazards of the job.
  • Hold regular safety training meetings. When it’s clear that your company culture keeps safety top-of-mind, it’s harder to fake an injury because the circumstances just aren’t there.
  • Provide training on work-related hazards, exposure risks and safety equipment.
  • Educate employees as to the proper way to use ladders and lift, pull, and carry objects.
  • Explain to employees the value – and the obligation – of workers’ compensation and how to report injuries.
  • Inform employees and new hires about a zero-tolerance policy for false claims.
  • Consider installing video equipment and drug testing.
  • Provide a safe way for employees to report suspicious workers’ comp activity.
  • Choose a designated workers’ comp medical provider, and use them consistently. Work closely with them to ensure injuries at each occurrence are consistent with the employees’ explanation of the injury and what type of light duty work they can perform when returning to work.
  • Maintain and report accurate records regarding employee roles and numbers.


When an injury occurs

  • Designate a point person to be in charge when an injury occurs. This person will call for medical help as needed; alert the predetermined medical provider of an incoming injured worker; log a description of the accident and injury; note witnesses’ names; preserve any workplace evidence; and report the injury to HR and the insurance claims contact within your company.
  • Keep an ear to the ground. While many rumors are just that – rumors, employee conversations may be a source of information about the accident or injured worker. If an employee comes forward with suspicions of workers’ comp fraud, take them seriously without jumping to conclusions.
Related: How faster workers’ compensation claim reporting can reduce costs