Burk: Advice to Employers in Dealing With Potential Fraud

Tuesday, October 25, 2022 | 0

New Jersey Statutes Annotated 34:15-57.4 (commonly known as the Workers’ Compensation Fraud Act) states in pertinent part:

Maura Burk

If a person, purposely or knowingly makes, when making a claim for benefits pursuant to RS 34:15-1 et seq., a false or misleading statement, representation or submission concerning any fact which is material to that claim for the purpose of obtaining the benefits, the division may order the immediate termination or denial of benefits with respect to that claim and a forfeiture of all rights of compensation or payments sought with respect to the claim.

This means that both past and future benefits may be forfeited as a result of fraud (past benefits generally being medical and TTD, and future benefits generally being potential permanency benefits).

The fraud act goes on to state:

[I]n addition to any other remedy available under law, if that person has received benefits pursuant to RS 34: 15-1 et seq. to which the person is not entitled, he is liable to repay that sum plus simple interest to the employer or the carrier … and the division shall issue an order providing for the repayment.

The fraud statute sets a very high burden of proof for respondents, as respondent needs to demonstrate that a false or misleading statement was made by petitioner, must be material to the claim and was made for the purpose of obtaining benefits in the workers’ compensation case.

The following are hypothetical situations where respondent may have a good argument that an employee committed fraud and should consider filing a motion to dismiss for violation of the fraud act.

Scenario 1

Tom is under authorized treatment for a Jan. 1, 2022, work accident where he injured his low back and left shoulder. The authorized doctor placed petitioner out of work as of Jan. 25, 2022. Petitioner is receiving TTD, as he is out of work and continues to deposit his checks but, at the same time, continues to work as a driver for a food delivery company and is paid from his second job at the same time he receives TTD from his first job.

Our position is that this is fraud. An injured worker cannot collect TTD for not being able to work but actually is working. In this example, petitioner is representing that he cannot work but is working and therefore, he is making a fraudulent representation.

Scenario 2

During testimony on a motion for med/temp, Ryan testifies that due to his April 15, 2022, work injury, he cannot walk more than one block. He also cannot do any household chores and testifies that he has had to hire a cleaning service. However, surveillance shows Ryan performing in triathlons and marathons, winning awards for being in second and first place in various events. He is also seen working on his home and building an addition to his back patio.

As Ryan has grossly exaggerated his abilities, our position would be that this is fraud. Misrepresenting of abilities to this degree is similar to the case of DuBrel v. Maple Crest Auto Group, where petitioner testified that he could no longer do a variety of things, including training and trailering horses. However, petitioner was observed doing these activities in direct opposition to his testimony.

The court in this case found that this type of false testimony was a flagrant violation of the Workers’ Compensation Fraud Act. The Appellate Division affirmed the decision of the judge of compensation in terminating all benefits.

Scenario 3

Mary has a work accident on March 1, 2022, where she injures her left knee. During her course of authorized treatment, she specifically denies any prior left knee issues, injuries or treatment. However, respondent’s investigation reveals that on Jan. 2, 2022, petitioner underwent arthroscopic surgery to the left knee. She then underwent a course of post-operative physical therapy through Feb. 15, 2022, and treated with her prior surgeon through Feb. 28, 2022. When confronted with this information, Mary indicates that she simply “forgot” about her prior surgery and prior treatment.

We would maintain that this is fraud in misrepresenting past medical history. In a case like this, testimony or specific interrogatories would likely be needed to elicit further details. It is difficult to believe that Mary “forgot” about surgery from two months ago and “forgot” about her prior relevant treatment, which ended just before her work accident to the same knee, but the judge will ultimately decide on this issue.

Scenario 4

Bob says he got hurt in Aisle 4 of the grocery store, falling by the cereal boxes. He reported the injury right away and specifically says he fell by the Cheerio boxes. Security video shows Bob never even walked down Aisle 4 on the alleged date. In fact, he never fell at all.

It would be our position that this is fraud. The fabrication of a work injury for the purposes of obtaining medical treatment, TTD and/or permanent disability benefits is fraud.

If respondent obtains new information in a closed file, respondent can re-open the case. For example, in a case where a prior order approving settlement was awarded and there may now be fraud (for example, petitioner is observed doing very physical activities that he stated he could not do at the time of settlement), respondents can file its own re-opener application to lower the award.

Alternatively, respondents can file a motion to vacate the prior order approving settlement.

Finally, respondents can file a motion to dismiss for violation of the Workers’ Compensation Fraud Act. Respondents may also be able to negotiate a small Section 20 settlement or dismissal of a case where the employee committed fraud.

Maura Burk is an attorney with Capehart Scatchard, a defense law firm in New Jersey. This post appears with permission from the New Jersey Workers' Comp Blog.