ISSUES: Fraud and Other Bad Behavior

This post will highlight those sections of the Longshore and Harbor Workers’ Compensation Act that deal with fraud and other improper conduct.  It will also evaluate the statutory remedies available to the injured party, and it will offer suggestions for improvement.

NOTE:  Most of the following language was added by the 1984 amendments.

33 U.S.C. 930(e) – “Any employer, insurance carrier, or self-insured employer who knowingly and willfully fails or refuses to send any report required by this section or knowingly or willfully makes a false statement or misrepresentation in any such report shall be subject to a civil penalty not to exceed $10,000 for each such failure, refusal, false statement, or misrepresentation.”

This section describes the Employer’s First Report of Injury, Form LS-202, which is due within 10 days of knowledge of the injury.  The penalty is now $11,000.  The U.S. Department of Labor is tracking these closely because shortening the reporting time is the Longshore Division’s current performance measure, which is reviewed by the Office of Management and Budget at budget time.

33 U.S.C. 931(a)(1) – “Any claimant or representative of a claimant who knowingly and willfully makes a false statement or representation for the purpose of obtaining a benefit or payment under this Act shall be guilty of a felony, and on conviction thereof shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.”

This is the employer’s remedy under the Longshore Act against a claimant who has filed a fraudulent claim.  The employer’s complaint must be filed with the office of the U.S. Attorney for the district in which the injury is alleged to have occurred.

The Act provides only a credit against unpaid future compensation due – if there is no compensation due then the employer has no right to restitution.

33 U.S.C. 931(b)(1) – “No representation fee of a claimant’s representative shall be approved by the deputy commissioner, an administrative law judge, the Board, or a court pursuant to section 28 of this Act, if the claimant’s representative is on the list of individuals who are disqualified from representing claimants under this Act maintained by the Secretary pursuant to paragraph (2) of this subsection.”

There is currently no list.

33 U.S.C. 931(c) – “A person including, but not limited to, an employer, his duly authorized agent, or an employee of an insurance carrier who knowingly and willfully makes a false statement or representation for the purpose of reducing, denying, or terminating benefits to an injured employee, or his dependents pursuant to section 9 if the injury results in death, shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.”

33 U.S.C. 948(a) – “It shall be unlawful for any employer or his duly authorized agent to discharge or in any other manner discriminate against an employee as to his employment because such employee has claimed or attempted to claim compensation from such employer, or because he has testified or is about to testify in a proceeding under this Act.  The discharge or refusal to employ a person who has been adjudicated to have filed a fraudulent claim for compensation is not a violation of this section.”

The employer is liable for a fine between $1,000 and $5,000.  The worker’s remedy is back pay and job reinstatement.

33 U.S.C. 926 – “If the court having jurisdiction of proceedings in respect of any claim or compensation order determines that the proceedings in respect of such claim or order have been instituted or continued without reasonable ground, the costs of such proceedings shall be assessed against the party who has so instituted or continued such proceedings.”

“Costs” do not include attorney fees.  And costs can only be imposed by a federal district court or federal circuit court of appeals.

33 U.S. 927(b) – “If any person in proceedings before a deputy commissioner or Board disobeys or resists any lawful order or process, or misbehaves during a hearing or so near the place thereof as to obstruct the same, or neglects to produce, after having been ordered to do so any pertinent book, paper, or document, or refuses to appear after having been subpoenaed, or upon appearing refuses to take the oath as a witness, or after having taken the oath refuses to be examined according to law, the deputy commissioner or Board shall certify the fact to the district court having jurisdiction in the place in which he is sitting … which shall thereupon in a summary manner hear the evidence as to the acts complained of, and, if the evidence so warrants, punish such person in the same manner and to the same extent as for a contempt committed before the court ….”

This section does not pertain to fraud.  It is only for abuse of process or disruptive behavior.

33 U.S.C. 907(c)(1)(A) – “The Secretary shall annually prepare a list of physicians and health care providers in each compensation district who are not authorized to render medical care or provide medical services under the Act.  The names of physicians and health care providers contained on the list required under this subparagraph shall be made available to employees and employers in each compensation district through posting and in such other forms as the Secretary may prescribe.”

There is currently no list.

33 U.S.C. 908(j) – The employer may inform a disabled employee of his obligation to report to the employer not less than semiannually any earnings from employment or self-employment, on such forms as the Secretary shall specify in regulations (Form LS-200).

Any employee who fails to report earnings when requested, or knowingly and willfully omits or understates any part of such earnings, forfeits his right to compensation with respect to any period during which the employee was required to file such report.

The employer can only recover forfeited compensation from unpaid compensation due.

33 U.S.C. 938(b) – “Avoiding payment of compensation.  Any employer who knowingly transfers, sell, encumbers, assigns, or in any manner disposes of, conceals, secretes, or destroys any property belonging to such employer, after one of his employees has been injured within the purview of this Act, and with intent to avoid the payment of compensation under this Act to such employee, or his dependents, shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year, or by both such fine and imprisonment; and in any case where such employer is a corporation, the president, secretary, and treasurer thereof shall be also severally liable to such penalty or imprisonment as well as jointly liable with such corporation for such fine.”

33 U.S.C. 938(a) – “Any employer required to secure the payment of compensation under this Act, who fails to secure such compensation shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year, or by both such fine and imprisonment; and in any case where such employer is a corporation, the president, secretary, and treasurer thereof shall be also severally liable to such fine or imprisonment as herein provided for the failure of such corporation to secure the payment of compensation; and such president, secretary, and treasurer shall be severally personally liable, jointly with such corporation, for any compensation or other benefit which may accrue under the said Act in respect to any injury which may occur to any employee of such corporation while it shall so fail to secure the payment of compensation as required by section 32 of this Act.”

This is very bad news for officers of an uninsured employer.

Evaluation – The remedies for the employer are of limited effectiveness.

–         Under section 931(a)(1) the employer’s sole remedy for fraud is to file a complaint with the U.S. Attorney’s office, where the employer can only hope that the complaint will be investigated and action taken.

–         Under section 926 the employer must go to court in order to try to recoup “costs” which do not include the employer’s attorney fees.

–         Under section 927(b) the employer must again incur the expense of going to court to seek a contempt order against the claimant.

–         Under sections 931(a) and 908(j) there is no restitution for fraudulently obtained or forfeited compensation.  Any recovery can only come against future unpaid due and payable compensation.

Room for Improvement? – Any changes will have to come from Congress in the form of amendments to the Act.  It may be worthwhile to consider:

–         Giving the U.S. Department of Labor’s Office of Inspector General express authority to investigate fraud under the Act,

–         Giving the U.S. Department of Labor independent criminal prosecution authority limited to section 931(a) and (c),

–         Giving the employer an express right to an action for restitution in cases of fraud.

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