Rampant Workers’ Compensation Fraud – The Truth  
Fraud alert on a computer laptop

Rampant Workers’ Compensation Fraud – The Truth

Unless you’ve been living off the grid or trapped under a rock, most of us have heard statements such as, “Most workers’ compensation claims are bogus!”, “Workers’ Compensation reform is necessary because so many claims are fraudulent.” and “All those fraudulent workers’ compensation claims are driving up employers’ workers’ compensation rates.”

Every one of those claims is like the mythical Kraken, ugly and dangerous, but also, completely fictional.

Studies have shown that only approximately 1-2% of all claims filed are fraudulent. That is far from “most”, “prevalent” or “rampant.” Insurance companies downplay the truth and employers tend to latch on to the exceptions, like a man out of Raleigh who obtained more than $150,000 in workers’ compensation benefits through a fraudulent claim.

Focusing on the exceptions instead of the reality, many employers make negative assumptions about claims filed. This isn’t only detrimental to injured employees but ultimately drives up costs for employers too as more claims are denied and litigated.

So, we now know that it isn’t true that most workers’ compensation claims are fraudulent, what is also not true is that fraudulent claims are driving up employer’s workers’ compensation insurance premiums. In North Carolina, premiums are essentially based on the number of employees and size of payroll, types of work the particular business does, claims history for that business, how long the business has been in operation, and class codes (categories of work). Because claims history is a factor, if fraudulent claims made up a high percentage of claims for a particular employer, then it could impact premiums. Of course, if any employer had a high number of claims, fraudulent or not, the same would be true.

What about the fraudulent claims in our neck of the woods? The North Carolina Industrial Commission recently released its 2020 annual report. 59,410 workers’ compensation claims were made last year. Of those claims only 159 cases of claimant fraud were reported, 37 remain pending and 122 were closed. What is most interesting is that 9,083 cases of employer fraud were reported, 495 cases remain pending, 8,588 are closed and criminal charges were filed against 551 employers. In fact, over the last five years, the State has brought criminal charges against over 2,400 employers for workers’ compensation malfeasance. Employer fraud includes but is not limited to such matters as failure to maintain workers’ compensation insurance, deliberate employee misclassification (claiming someone as an independent contractor instead of an employee), and deducting workers’ compensation premiums from employee paychecks.

Employee misclassification is the most prevalent type of employer workers’ compensation fraud. Labeling an employee an “independent contractor” deprives injured workers of workers’ compensation benefits because independent contractors are not entitled to those benefits under North Carolina Workers’ Compensation law. However, the label and how people are paid do not matter. In workers’ compensation claims, whether or not someone is an independent contractor or an employee, is a matter of applying common law principles. In other words, just because an employer labels someone an independent contractor, doesn’t mean that is how the North Carolina Industrial Commission will view them.

Workers’ compensation insurance companies perpetuate these falsehoods about claim fraud because they are profit-making businesses and they make those profits by denying claims, paying out as little as possible on accepted claims, and raising premiums. Once they convince their insureds (employers) that there is pervasive claim fraud, many employers create an environment in which injured workers fear filing claims. Injured employees shouldn’t fear filing workers’ compensation claims. Looking out for one’s health and financial interest is essential. It is also easier for insurance companies to justify rate hikes if they blame it on injured workers and fraud, instead of their own desire to increase profits.

If you’ve been hurt at work and have any questions or concerns about filing a workers’ compensation claim, you should contact a qualified attorney. If you’ve been hurt at work and labeled an independent contractor, it is especially important that you contact a qualified attorney to discuss your specific circumstances and options, as most of these claims require litigation.


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