West Virginia has a message for employers that have defaulted on workers comp obligations in one company, and moved on to another: You can run, but you can’t hide. The state has an aggressive plan to collect from deadbeat employers who owe the state millions of dollars in unpaid workers compensation claims. We found this story interesting after just having discussed the implications of insolvencies on state guaranty funds a few days ago. It is just such a scenario prompting West Virginia’s crackdown.
“The fund currently has $3.3 billion in unfunded liability because it needs about $4.2 billion invested to cover the projected costs of the claims it will pay out over the next 40 years but only has about $900,000 invested.”
The state has identified deadbeats through a new state Employer Violator System that crosschecks data from the Tax and Revenue Department database to identify ties between active companies and defunct companies, looking for shared officers, owners, and principals. They have identified nearly 400 companies that owe the fund more than $124 million in unpaid debts, and they plan to track them down and take aggressive actions:
“The system was developed to comply with a 2003 legislative mandate that state agencies revoke contracts, yank licenses and permits and otherwise block companies and individuals from doing business in the state if they default on their workers’ comp obligations.”
We’ve certainly heard of many state efforts to crack down on employer fraud – it seems as though this issue is particularly prominent right now. There is no doubt some relation between a tough economy when employers are squeezed and a spike in firms that fail to insure their employees. Add to that, the numbers of companies that fail in a bad economy, defaulting on obligations. By tracking senior managers from one business venture to another to collect debt, West Virginia’s initiative raises the stakes for noncompliant employers, althought there will still be issues to sort out.
“…the agency is still debating is how close the association must be between a defaulted company and other companies before those other companies also end up being barred from doing business in the state.”
This bears watching – some issues will no doubt play out in the courts. It may be good news for injured employees and taxpayers who have been stuck with bills. Compliant employers and insurers who bear a cost burden for the sins of the few should also applaud aggressive efforts to crack down on fraud wherever it occurs.