I did a CompTalk Radio interview several years back with a gentleman who at the time was the chief workers' compensation fraud investigator for the State of Florida. In that discussion he told me that fraud in the state ran about “50/50” between employers and employees, but “without a doubt, the really big money in fraud is on the employer side”. He was of course talking about employers who fail to secure insurance, misclassify employees, pay cash under the table, or otherwise fail to report accurate payrolls for premium calculation purposes. Fraud of this nature in Florida is suspected to be in the hundreds of millions of dollars.
On Friday, June 7th, Florida Governor Rick Scott signed into law a bill that will provide state fraud investigators a very unique tool. The law mandates the creation of a database that check cashing stores in the state will be required to use to report check cashing transactions greater than $1,000. Check cashing operations will have to record and report payor, payee, fee charged, type of identification presented as well as the payee's workers' compensation insurance policy number (if the check was made out to a business). This database will be able to cross reference with the Secretary of State's Corporate Registration database, which will allow investigators to spot potential fraudulent activity related to workers' comp.
This legislation was the result of recommendations from a workgroup formed by Chief Financial Officer Jeff Atwater. He convened the group with the mission of looking at the “complicated and organized premium avoidance scheme that is pervading the workers' compensation insurance market”. The workgroup found that, in many cases, check cashing stores were being used to facilitate this activity.
It is a unique idea, when you think about the base trends the workgroup likely found. Unskilled laborers are more likely to use those services, and are also more likely to be exposed to situations where their employer is not maintaining proper insurance. Similarly, businesses being paid for work and looking to keep that information “off the books” are likely to use such services. Investigators will now have access to better information, and be able to develop profiles of what a company's true payroll or economic activity is, versus what it reports. I would suspect that this database will be quite useful for sales tax evasion issues as well.
That is important to those of us who reside in Florida. In addition to making sure everyone is sharing the burden of workers' compensation, we need to collect all the sales tax possible. That is the only thing keeping us “income tax free”. On the surface, it smacks a bit of “Big Brother”, but it is really a tool designed to make sure everyone is playing fair and following the same rules.
It's a shame the state of Florida can't get behind its Prescription Drug Monitoring Database with the same zeal and gusto.