From an employer’s view, it’s easy to see the negative financial impact caused by claimant fraud. If an employee makes false statements regarding the circumstances or seriousness of an injury, the fraudulent claim can result in lost productivity and higher premiums—consequences that directly affect your bottom line.

Premium fraud can be much less obvious—and even more financially devastating.

For example, let’s say you own a construction business. Your success relies upon your ability to provide competitive estimates for each job you bid on. If you payroll a crew of 15 journeymen, you’ll pay workers’ compensation premiums according to their job responsibilities. These premiums are included in your cost of doing business.

Now, let’s imagine that your competitor, Company X, also has a crew of 15 journeymen—but on his payroll, he classifies five members of his construction crew as office workers–job classifications that carry less risk and therefore lower workers’ compensation premiums. Competitor X then uses his illegal “savings” to underbid you and secure the contracts.

By committing premium fraud, Competitor X not only hurts your business, he cheats all the legitimate businesses with whom he competes. As a result, you may have to lay-off workers. What’s more, if Competitor X requires his workers to participate in a “bogus” independent contractor scheme, he puts them at risk by denying their right to medical and disability coverage.

Should you care that your competitor is cutting corners? Should you be concerned about the way he treats his employees? The answer is yes. Workers’ compensation fraud hurts honest businesses. It jeopardizes employment and employees. And it hurts everyone’s ability to compete in a fair and open marketplace.