Who is more trustworthy: Newly hired employees or those who have served your company loyally for years? The answer may shock you. When we began our coverage on employee fraud last month, we pointed out some disturbing facts: More than 80 percent of employees who commit fraud against their employers had never previously been punished nor terminated by an employer for conduct. Also, most fraudsters work for their employers for years before committing fraud. Statistically speaking, the more tenure an employee has, the greater the probability they will steal from you.
We’ve already covered financial statement fraud, false invoices and payroll theft in part one of our two-part series. But, unfortunately, the trail doesn’t go cold there. Other forms of employee fraud are costing businesses millions of dollars each year.
“I can honestly say it is shocking when you hear some of the stories that employers share,” says Jamie DeBellas, a commercial property and casualty senior account executive for Brown and Brown Insurance of Austin. Two issues in particular are workers’ compensation and unemployment fraud. Here’s how to spot and stop them.
Workers’ Compensation Fraud
According to the Texas Department of Insurance (TDI), employees most often commit workers’ compensation fraud by dishonestly collecting employee benefits like disability. Most often, this type of employee benefit fraud happens when:
- An employee draws benefits due to an inability to work, but then works full time at an unreported job.
- Fakes an injury in order to collect benefits.
- Collaborates with a health care provider to commit fraud (including billing for services not provided).
How can you spot this type of fraud? Pay attention to the timing and nature of the injuries reported by employees. TDI’s Texas Insurance Fraud Division points out fraudulent injuries often happen without witnesses or in a location the employee does not normally work. They might occur late Friday/early Monday or before a strike, holiday or in anticipation of termination, or are not reported until a week or more after the incident. Also, pay attention to the history of the workers’ compensation claims, conflicting diagnoses from subsequent treating providers, and evidence the employee is working elsewhere.
As we mentioned above, health care providers may also commit benefit fraud—with or without the employee’s knowledge. TDI cautions employers should be vigilant when it comes to checking bills or explanation of benefits for services from health care providers or attorneys associated with the case. Medical reports that seem to merely be copies of previous reports should be scrutinized. As should bills from healthcare providers or attorneys who represent an unreasonable amount of billable hours (particularly if the employee complains the provider or attorney has been often unavailable to meet).
It’s estimated the U.S. loses about $3.3 billion annually to unemployment fraud. This can (and does) significantly increase the taxes paid by employers associated with unemployment insurance. According to the Texas Workforce Commission (TWC), most cases include employees who start work and do not accurately report the work or work hours when requesting benefit payment. Identity theft is also a common form of unemployment insurance fraud. It often happens when someone uses another person’s identity to apply for benefits, or steals another person’s login information to change or continue to request benefits.
Overpayment of unemployment benefits can result in significant financial hardship for employees. In Texas, as in many other states, all unemployment benefit overpayments must be recovered, without exception for hardship and even if the employee collects overpayment by accident. If the overpayment is determined to be fraudulent (willful on the employee’s part), all benefits plus an additional penalty must be paid back (the amount varies by state and includes a federal penalty as well).
Employers who simply submit timely and accurate wage and unemployment reports go far in helping the government identify unemployment fraud issues. It can also help to educate employees on what constitutes unemployment fraud in the first place. Careerealism compiled a list of the most common types of unemployment insurance fraud many employees are not even aware are illegal. These include:
- Failing to report employment, including cash jobs, commission, self-employment, 1099 or temporary.
- Making a false statement or misrepresent information to increase or receive benefits (for example, not reporting school attendance when receiving benefits).
- Not reporting work refusals.
- Fabricating job searches or not conducting a solid work search.
- Not reporting a work separation.
- Failing to report being incapable and not available to work (for example, sick or injured, abroad, etc.) and receiving benefits anyway.
- Not reporting other types of reimbursement (for example, Workers’ Compensation payments).
“The good news is that intentional claimants are looking for the path of least resistance, so proactively deterring this behavior can be quite effective,” explains DeBellas. “However, once the claims are made, these cases can be very expensive and time consuming for any employer.”
Have you seen these types of employee fraud within your own organization? Are you sure they aren’t happening without your knowledge?
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