How to Protect Yourself Against Workers’ Comp Fraud in New Jersey

How to Protect Yourself Against Workers’ Comp Fraud in New Jersey

Paul falls at work and suffers a back injury, but just 3 weeks after going on medical leave he is spotted riding his motorcycle through town. Janice, a production manager at your company, tells an employee who slipped on a wet floor to “suck it up” and doesn’t mention this to the HR department until days later. Although they may be rare, cases of workers’ compensation fraud in New Jersey can be a troublesome and legally devastating aspect of being in business. Even employers who rely on PEO outsourcing to provide workers’ compensation coverage need to be vigilant.

The High Cost of Workers’ Compensation Fraud

Any workers’ compensation claim can send even the most experienced of New Jersey small business owners into a tailspin. There are many responsibilities and expenses associated with a serious injury or illness that happens on the job, even when using a professional employer organization, or PEO company. Each year, billions of dollars are fraudulently spent on unnecessary medical care, lost wages, and the legal and administrative costs of tracking down violators. This isn’t even counting the costs of rising workers’ compensation insurance due to cases of fraud – these get passed onto PEOs and then to employers.

Information on the New Jersey Workers’ Compensation Fraud Act

Fortunately, workers’ compensation fraud is being cracked down on in a big way by the state Department of Labor and Workforce Development agency. Under the New Jersey Workers’ Compensation Fraud Act (see NJ Workers’ Compensation Statute, N.J.S.A. 34:15-57.4.), criminal charges, fines and jail time can be imposed on any employee who willfully misrepresents a workplace injury for the purposes of obtaining workers’ compensation benefits. Additionally, organizations who fail to provide the required amount of workers’ compensation insurance and benefits to eligible employees or those who are found to be committing any type of workers’ compensation fraud by altering claims in their favor, can be charged criminally and civilly to the tune of $10,000 and more in penalties and up to 18 months in jail.

What to Do if You Suspect Workers’ Compensation Fraud

All organizations that employ others and its assigned officers, including payroll managers, have an ethical and legal duty to report suspected cases of workers’ compensation fraud. The New Jersey Department of Labor and Workforce Development advises that you can contact the NJ Division of Workers’ Compensation and ask for the WC Fraud Investigation Department if you suspect fraud from an employee, the employer or an agent of the employer, a medical provider, or a worker’s compensation lawyer involved with the case. You can call 1-877-55-FRAUD for more information.

How to Make Sure Your PEO Has a Valid Workers’ Compensation Policy

Just because your company chooses to outsource payroll management doesn’t mean you are exempt from workers’ compensation fraud. In fact, your business needs to take measures to ensure that the legally required workers’ compensation insurance coverage for your employees is valid to avoid being fined. To make sure your professional employer organization has a valid workers’ compensation policy, it’s important to request proof of insurance at least once per year.

The NJ DOL recommends that employers ask for a mailed copy of the current certificate of insurance as issued by a mutual association or the stock company authorized to write on this type of policy in New Jersey. The certificate should include the effective date of coverage as well as the policy number and agency carrying the policy. If in doubt, contact the issuer of the policy to ensure it is still in effect. The general rule of thumb in terms of adequate workers’ compensation premium is 1 to 2 percent of the salary of each employee that your outsourced payroll administrator can determine.

The good news is that due to the diligence of agencies like the New Jersey DOL, the incidents of workers’ compensation have dropped in the last ten years. However, you can do your part by being mindful of obtaining a proof of insurance certificate from your PEO in New Jersey each year.

SourceOne Partners is a team of PEO and payroll experts that specialize in finding solutions for small businesses. With offices in South Florida and New Jersey, we can help you find a solution to better manage your PEO and payroll services, employee benefits and company taxes so that you can save time and money. Please call 561-674-0748 to for immediate assistance or click here to contact us online.