Our Worker’s Compensation Act here in New Jersey contains a provision regarding Fraud. While many people assume it refers to false or misleading claims by workers, in reality it applies to employers as well. This was illustrated recently by two recent cases handled by the Office of the Insurance Fraud Prosecutor. In the first case a company under-reported the number of its employees and wages to its workers compensation insurance company. By doing so it gave the false impression to the insurance company that it was entitled to lower compensation premiums. The company pled guilty to this charge and was ordered to pay restitution to the insurance company in the amount of $75,000.

In the second case a company provided false and misleading information to its insurance company to lower its premiums. It not only under-reported the amount of its payroll but also misrepresented the type of work performed by its employees. In setting workers compensation insurance premiums insurance companies take into account the amount of employees, the amount of the payroll, the type of work performed, and other factors. In this case the Insurance Fraud Prosecutor determined the company stole a total of more than $315,000 from its worker’s compensation insurance company, and also failed to file tax returns and underreported wages to the State. In addition to restitution, the president of the company is facing the possibility of jail time.

These types of insurance fraud are clearly contrary to the intent of the New Jersey Worker’s Compensation Act, which is to ensure that injured workers are fairly compensated according to the law. Fraud by employers such as this clearly shows their contempt for this lawful process.

Alfred Vitarelli is a Shareholder in Stark & Stark’s Marlton, New Jersey office, concentrating in Workers’ Compensation Law. For more information, please contact Mr. Vitarelli.