Workers’ Compensation Fraud Warning Act Exposed

The Workers' Compensation Fraud Warning Act was adopted by ALEC's Commerce, Insurance, and Economic Development Task Force and approved by the ALEC Board of Directors in 1999. According to ALEC's website, the Act was re-approved by the Board of Directors on January 28, 2013. (Accessed on 7/17/2015).

CMD's Bill Summary

This bill shifts the workers' compensation program towards employer interests. It authorizes an employer or its insurer to "notify" employees claiming worker's compensation about what activities constitute fraud and would subject them to criminal prosecution. These warnings could be used to intimidate workers with legitimate claims.

ALEC Bill Text

Summary

The Workers’ Compensation Fraud Warning Act authorizes an insurer or self-insured employer to provide notice to an injured worker on or with a check for temporary disability benefits that it is unlawful to make any knowingly false or fraudulent material statement for the purpose of obtaining worker’ compensation. The notice would state that the acceptance of employment with a different employer that requires the performance of activities that the worker has stated that he or she cannot perform because of injury could constitute fraud and result in criminal prosecution.

Model Legislation

Section 1. {Short Title}

The Workers’ Compensation Fraud Warning Act

Section 2. {Legislative Declarations}

The state finds and declares that:

A. Workers’ compensation fraud is the largest source of fraud within the property/casualty industry accounting for more than one-third of all property/casualty insurance fraud; and

B. The cost of workers’ compensation insurance fraud is passed on to employers in the form of higher premium costs; and

C. Insurers and self-insured employers should have the right to notify workers’ compensation claimants that certain actions following the acceptance of benefits may constitute fraud.

Section 3. {Definitions}

Section 4. {Warning Notice}

An insurer or self-insured employer may provide the following notice to an injured worker on or with a check for temporary disability benefits:

Warning: Acceptance of employment with a different employer that requires the performance of activities you have stated that you cannot perform because of the injury for which you are receiving temporary disability benefits could constitute fraud and could result in criminal prosecution. If convicted, you could lose your rights to workers’ compensation benefits and face imprisonment up to {blank} years and fine of up to {blank} or double the amount of the fraud, whichever is greater.

Section 5. {Severability}

Section 6. {Effective Date}

Adopted by the CIED Task Force and approved by the ALEC Board of Directors in 1999.