Posted on April 11th, 2019
Below is a complete transcript of this video.
What’s going on fellow entrepreneurs? John Fagerholm again with Defend My Biz.
Today I want to talk about a subject that I don’t reference very much, but I’ve gotten two calls this week about it and I think it’s important.
It’s not my bread and butter, and that’s why I don’t talk about it that much, but it’s the importance of workers’ comp insurance, and the importance of training your employees about worker’s comp and what it is.
What people don’t realize is that, first of all, not having workers’ comp insurance is just insane if you’re in California. The penalties for it are just way too high. It’s $1500 per employee, per month, going back three years. So, you have four or five employees, and, you know.
The other things are when the enforcement comes in when you don’t have workers’ comp insurance, they shut you down.
They completely shut down your business until you can get workers’ comp insurance. Workers’ comp insurance is going to be more expensive because you didn’t have it and you’re being forced to get it, so the rates get jacked up by the insurance companies.
Then on top of that, you’re required to continue paying your employees for all of their regular work hours until you get the workers’ comp insurance, and you open the business back up.
That’s just too heavy of a penalty not to have it. It just doesn’t make sense.
That’s not really what I want to get into. What I want to get into is training for workers’ comp insurance. What people don’t realize is that one of the risks you have is a bunch of fraudulent workers’ comp claims.
So, for example, I have a client that purchased a sewing factory. At the time that he purchased it, the workers’ comp insurance was $150,000 a year, because I think he had something like 300 employees if I’m not mistaken. 200, 300 employees, something like that, so the insurance was very high.
Because he was a little bit of a rough guy, and the previous employer was very easy on his employees, this guy came in and made a bunch of changes, so the employees didn’t like him very much.
At some point he laid off about 20 people. A certain section he laid off because he just didn’t need them anymore. All of them filed workers’ comp claims.
Not to backtrack or get sidetracked, but there are two types of workers’ comp claims. There’s one where it’s an actual injury, “Hey, I fell off a ladder and broke my leg.” Those are easy. The tough ones are continuous injury claims because those you can even file after termination. You can say, “Hey, I do this movement all the time, and now I have bad shoulders from doing that.”
Those are the ones that are usually the most wrought for fraud. Now, I’m not saying that all of them fraudulent, I’m saying that those are the ones that are easy to be fraudulent claims.
This particular client had 20 people file workers’ comp claims, so in one year his insurance went from $150,000 to $450,000. That’s a huge jump, and it basically put him out of business. He filed for bankruptcy and closed up shop. Now because of 20 people, 200 plus other people are out of jobs and basically, a thriving business is no longer there.
Here’s what you need to do with workers’ comp claims. I’m sorry, not workers’ comp claims but with your employees and workers’ comp. Employees have to be trained and understand that fraud is punishable. Workers’ comp fraud is punishable by 5 years in prison, and I think it’s punishable by up to $150,000 in fines.
You can not, let me emphasize that, you can not tell people that they can’t file workers’ comp claims because they may get fined or put in prison. That’s not what I’m saying here. What I’m saying here, is make sure they understand that if they file a fraudulent claim that’s what can happen.
I haven’t found California to be that good at prosecuting these fraudulent claims, but, I think at least the employees knowing that fraudulent claims can be punishable is at least on the right step to avoiding some of these fraudulent claims that put you out of business.
All right. That’s it for today.
Thanks, everybody, appreciate. Til next time.
