California Employer Will Pay Nearly $700,000.00 in Restitution for Workers’ Compensation Fraud

On May 3, 2024, the Insurance Journal reported that a business owner in California had been ordered to pay nearly $700,000.00 in financial restitution as part of a workers’ compensation fraud case. Jorge Maldonado—the owner of a construction company—underreported his company’s number of employees. Here, our Sacramento workers’ compensation defense lawyers discuss the case in more detail.

Workers’ Compensation Fraud Enforcement Action: Underreported Number of Employees

Jorge Maldonado—the owner of a company called Pro-Care Building Maintenance—was convicted of felony workers’ compensation insurance fraud in 2023. Recently, additional court proceedings resulted in Mr. Maldonado being held financially liable for $687,560.00 in restitution. Prosecutors determined that he underreported the number of employees at his company to three different insurance companies between 2015 and 2017. By doing so, insurers suffered major losses.

How Workers’ Compensation Premiums are Determined in California

An employer is responsible for paying the proper workers’ compensation insurance premiums. The costs vary by employer. Here are three factors that directly impact the amount employers will pay in workers’ compensation premiums in California:

  • Industry: The type of industry significantly influences premium rates. Industries are categorized based on the level of risk associated with the work. For example, construction businesses generally incur higher premiums than office-based businesses due to the greater risk of physical injuries.
  • Safety Record: A company’s safety record is a crucial determinant in assessing workers’ compensation premiums. Insurers evaluate the frequency and severity of past workplace injuries and accidents. A better safety record leads to lower premiums as it indicates effective safety protocols and fewer claims.
  • Payroll: The total payroll of a company is directly proportional to the workers’ compensation premiums. This is because premiums are typically calculated as a rate per $100.00 of payroll. Employers must accurately report their number of employees and each employee’s total pay.

Business Owner Convicted of Felony Workers’ Compensation Offense in 2023

In 2023, California business owner Jorge Maldonado was convicted of felony workers’ compensation fraud. In California, workers’ compensation fraud is covered under both Section 1871.4 of the California Insurance Code and Section 550 of the California Penal Code. The statutes make it illegal to knowingly make a false or fraudulent statement, present a false claim, or assist, abet, solicit, or conspire with anyone engaged in making a fraudulent claim for the purpose of obtaining or denying workers’ compensation benefits. An employer who knowingly underreports payroll for the purpose of reducing their workers’ compensation premium can be charged with a felony fraud offense.

Contact Our Sacramento, CA Workers’ Compensation Defense Attorney Today

At Yrulegui & Roberts, we provide solutions-forward workers’ compensation defense services. Our team advises employers, insurance carriers, and claim administrators. If you have any questions about the defense of a workers’ compensation issue, please do not hesitate to contact us today for a confidential initial consultation. We provide workers’ compensation defense support in Sacramento and throughout the region.