By LexisNexis Workers' Compensation Law Center Staff
Workers' compensation is harsher on fraud than in civil cases. Civil cases use a balancing test, i.e., how bad is the misrepresentation versus the claim, whereas in workers' compensation, it is an absolute. The following discussion of workers' compensation fraud was excerpted from Larson's Workers' Compensation Law:
In order to impose a penalty upon a claimant for workers' compensation fraudor to disqualify that claimant from receiving workers' compensation benefits, the false statement, representation, or omission must be related to a material fact. Thus, in the first case to reach the New York appellate courts after the enactment of the state's 1996 anti-fraud provisions, Phelps v. Phelps, 277 A.D.2d 736, 716 N.Y.S.2d 160 (3d Dept. 2000), the court held that a landscaper who testified that he was unable to find work and that he had not worked due to a work-related spinal injury could be disqualified from receiving any additional wage replacement benefits when videotape evidence showed that the landscaper was sufficiently fit to lift large tree limbs and carry them on his shoulders. The court agreed with the state's Workers' Compensation Board that the landscaper's false statements were material.
Other material misrepresentations that have resulted in the sanctioning of workers' compensation claimants include:
• lying about the compensable circumstances of the injury itself
• submitting medical expenses both to the employer's workers' compensation insurance carrier and to a spouse's medical care insurance provider
• giving false information to treating physicians or independent medical examiners
• filing false medical mileage reimbursement forms or Second Injury Fund questionnaires, or other documents directly related to the claim
• giving false statements or testimony regarding a claimant's post-injury physical capabilities, or regarding the existence or non-existence of prior injuries
• giving false or misleading statements regarding the claimant's prior medical or chiropractic treatment.
In one particularly egregious case involving undisclosed post-injury earnings, an Ohio warehouse worker, who claimed that he sustained a work-related injury to his lower back and arms and who was eventually released to return to work, albeit with a restriction that he not lift anything heavier than 20 pounds, was disqualified from receiving additional benefits and ordered to repay workers' compensation outlays when his employer and carrier discovered that the worker had actively performed as a masked professional wrestler and as a wrestling referee while drawing disability income for his work-related injuries.
Acting on a tip, the employer and carrier hired a private investigator who observed the warehouse worker refereeing several matches. At various times during the matches the ''injured'' worker deftly reclined to his knees and slapped his allegedly injured arm against the wrestling mat. He was even observed lifting one of the other wrestlers and throwing him. During a two-month period, the worker was videotaped as he participated in numerous matches as a masked wrestler. The wrestling company's web site also indicated the worker was both a wrestler and referee.
When confronted with the evidence, the warehouse worker contended that his efforts were more in the nature of a hobby and that he did not derive any income from the activities. Determining that the worker's involvement was gainful employment, the Industrial Commission terminated the worker's benefits, declared an overpayment, and found that the worker had engaged in fraudulent conduct in order to secure workers' compensation benefits.
The court of appeals affirmed, stressing that the issue was whether or not the worker was involved in business activities for gain, not whether he actually realized any gain or whether the gain was substantial. The argument that the business did not turn a profit was not controlling.
Particularly damaging to the worker's case was the fact that prior to his injury he had actively wrestled using three separate ''stage'' names, two of which involved wearing a mask and one of which did not. After his injury, he discontinued the use of the unmasked character and only appeared incognito. The appellate court indicated there was sufficient evidence to support the Commission's finding that the worker's actions had been fraudulent, with the specific intent to deceive. [See Gyarmati v. George E. Fern Co., 2002 Ohio 4323 (Ct. App. 2002)]
Other examples of undisclosed post-injury earnings warranting the forfeiture of workers' compensation benefits include:
• a worker who failed to tell the Board that he enjoyed an annual salary of $25,000 as a minister while also receiving disability benefits
• a worker who neglected to inform his employer that he had received the sum of $270 through a sale of crack cocaine
• a claimant who drew temporary total disability benefits and also worked at a pizzeria/deli
• a ''disabled'' worker who helped out at his brother's business
Often, the employee provides the false statement or representation not so much to obtain workers' compensation benefits, but to obtain the employment itself. One might assume that since the typical workers' compensation fraud statute prohibits the employee from making ''a knowingly false or fraudulent material statement or material representation for the purpose of obtaining'' workers' compensation benefits, but is silent with regard to a worker's statements made to secure employment itself, that the courts would be lenient in such instances. That is generally, however, not the case. Thus, in Thompson v. Washington Regional Medical Center, 71 Ark. App. 126, 27 S.W.3d 459 (2000), a truck driver who had been advised that he suffered from a seizure disorder and who, in spite of such knowledge, represented to his employer that he was free from disability, was barred from recovering workers' compensation benefits following a vehicular accident caused by a related seizure episode. Affirming a decision of the state's Workers' Compensation Commission, the appellate court held that the injured employee had failed to prove by a preponderance of the evidence that his injuries arose from the employment.
It should be noted, however, that not all lies and false statements made by an employee in connection with a workers' compensation claim will cause a forfeiture of benefits. Where there is no causal connection between the lie and the injury itself, the courts will generally look beyond the false statement and award compensation. For example, in one Louisiana case, during a deposition related to his claim, a claimant testified that he had smoked marijuana on only one occasion in the five years preceding his injury. In fact, he had smoked the drug on weekends three or four times a month for several years. During the deposition he did admit, however, that he had smoked marijuana some four days prior to the work-related accident which severed his fingers.
After the deposition, he sent a clarifying letter to his attorney in which he admitted his regular marijuana use. When his attorney advised the employer of the drug use, it sought to have the claimant disqualified from receiving further benefits under the Louisiana statute which makes it unlawful willingly to make a false statement for the purpose of obtaining workers' compensation benefits. The workers' compensation judge held that the claimant had forfeited his right to future benefits because of the lie.
The appellate court reversed. While claimant had, indeed, lied about his marijuana use, the employer had failed to show that the claimant had actually lied to obtain benefits. Claimant's explanation that he had lied at the deposition because he thought he would lose his attorney if he admitted his drug use was credible, indicated the appellate court. Since there was medical evidence showing that the use of marijuana four days prior to the accident would not have been a contributing cause, claimant's lie was not disqualifying. [See Boise Cascade Corp. v. Dean, 99-1356 ( La. App. 3 Cir. 5/3/00), 767 So. 2d 76]
Finally, in New York, an employee's material false statement made in connection with his or her workers' compensation claim may result in the forfeiture of lost wage benefits, but not necessarily a forfeiture of future medical benefits related to the original, legitimate, injury. [See Jacob v. New York City Transit Auth., 26 A.D.3d 631, 809 N.Y.S.2d 618 (App. Div. 2006)] An Arizona court has similarly ruled. [See Obregon v. Industrial Comm'n of Ariz., 2008 Ariz. App. LEXIS 33 (February 28, 2008)]