Beware of Bogus “Work For Cash” Schemes

by | May 10, 2021 | Workers' Compensation, Workers' Compensation - News

I hear a lot about workers’ compensation fraud, sometimes from defense attorneys, sometimes from insurance adjusters, and even sometimes from judges and doctors.  The real statistics indicate the vast majority of workers’ compensation fraud is done by employers, either under reporting payroll, not having workers’ compensation coverage, or claiming that workers are really independent contractors.

The latest scheme was just revealed by the U.S. Department of Justice U.S. Attorney’s office in Florida on March 30, 2021.

The scheme went like this: The employers established shell companies supposed to be involved in the construction industry and obtained workers’ compensation insurance policies in the name of the shell companies to cover only minimal payroll for a few employees.  They then “rented” the workers’ compensation insurance to work crews who had obtained subcontracts with construction contractors on projects in many counties.  The contractors issued payroll checks for the workers’ wages to the shell companies and the two employers cashed the checks, then distributed the cash to the work crews after deducting their fee, typically about 6% of the payroll.  During the period of the scheme they cashed payroll checks totaling over $22 million, with their fees over $1.3 million.  They never reported to the government the wages paid to the workers, nor any employers portion of payroll taxes, including Social Security, Medicare, or federal income tax.

Wisconsin has a safety net for workers with uninsured employers, but it is a very difficult and time-consuming process.  Beware of such schemes.



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