DIR Fraud Prevention

DIR works to identify and prevent fraud in the workers’ compensation system, as well as wage theft and other types of fraud that affect California’s workers and law-abiding employers.

Topics covered in this Fraud Prevention page include:

What is workers’ compensation insurance fraud?
How does DIR combat workers’ compensation fraud?
How does DIR combat other types of fraud?
Related resources
Report fraud

What is workers’ compensation insurance fraud?

Workers’ compensation insurance fraud system takes many forms, including the following:

  • Medical providers
    • bill for inappropriate or unnecessary treatment
    • submit bills with improper medical codes
    • bribe indigent individuals to be “injured worker” patients
  • Insurers / claims administrators / third-party administrators (for self-insured employers)  
    • cause payments to be made to nonexistent claimants or medical providers
    • refer patients or clients to medical providers or attorneys for compensation
    • issue excessive payments to an attorney or medical provider in return for a kick-back
    • backdate documents in an attempt to avoid penalties for delays in benefit payments or alter documents to support an unjustified denial of a claim
  • Employers
    • misclassify workers to lower premium rates (high-risk jobs classified as low-risk)
    • report inaccurate payroll to lower premium rates (either under-report payroll to imply fewer employees, or over-report payroll as if workers were experienced journeymen with lower risk of injury).
    • misreport claims history (omit work injuries) to lower premium rates. 
  • Workers submit fraudulent claims for fabricated or exaggerated work-related injuries or illnesses.

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How does DIR combat workers’ compensation fraud?

As of Jan. 1, 2017, Labor Code section 4615 places an automatic stay on liens filed by or on behalf of providers who are criminally charged with certain types of fraud. The automatic stay prevents those liens from being litigated or paid while the prosecution is pending. (See Senate Bill 1160)

Effective Jan. 1, 2017, DIR excludes medical providers convicted of fraud and others from participating in the workers’ compensation system.  The Administrative Director of the Division of Workers’ Compensation issues a Notice of Suspension that becomes effective 30 days later unless appealed.  (See Assembly Bill 1244)

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How does DIR combat other forms of fraud (i.e., wage theft, payroll tax fraud, and misclassification of employees as independent contractors)?

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Related resources

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April 2017