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Kentucky Residents Sentenced in Workers’ Compensation Scheme

Prison cell

Two Kentucky residents were sentenced recently in federal court in connection with a workers’ compensation tax avoidance scheme, according to news reports. The Kentucky residents, a father and son, were sentenced to 30 months and 15 months in prison respectively for their roles in the scheme. A third man, a West Virginia resident, was also sentenced to 30 months in prison. A fourth participant in the scheme, an auditor for a workers’ compensation insurance carrier, has yet to be sentenced.

According to documents filed in the case, the auditor of an insurance carrier allowed the owners of a contracting company to under report their payroll to avoid paying workers’ compensation premiums in exchange for cash and other gifts. Prosecutors in the case indicated that “substantial assistance” was provided by the defendants that led to additional arrests and criminal charges. That, in turn, led prosecutors to ask for a reduced sentence for the defendants.

Workers’ Compensation Premiums

The workers’ compensation system is a no-fault system that offers benefits to workers who have been injured or who become ill as a result of their employment. A claimant may receive both wage replacement compensation benefits and have the costs of medical treatment covered for an eligible injury or illness.

In Kentucky, as in other states, most employers are required to provide workers’ compensation coverage to covered employees. Premiums for workers’ compensation coverage are determined using a variety of factors such as the type of work the covered employees typically engage in as well as the number of employees being covered. An employer who fails to accurately report the number of employees that require workers’ compensation coverage can be charged with a variety of criminal offenses including tax evasion and fraud.

Workers’ Compensation Fraud

Although it is considered a “white-collar” crime, workers compensation fraud is a serious crime that ultimately affects everyone involved in the system, including the workers. If your employer is not accurately reporting the number of employees that need coverage and/or the type of work those employees are doing, it could result in a denial of coverage if you file a claim.

If you are a Kentucky worker and you suspect that your employer is failing to maintain workers’ compensation insurance coverage for employees you may report this to the Kentucky Labor Cabinet online. If you suspect insurance fraud by an employer you may report that to the Kentucky Department of Insurance by calling 502-564-1461.

As an eligible worker, you have the legal right to be properly covered by workers compensation insurance. In the event that you are injured, or become ill, as a result of your employment, chances are that you and your family will need the benefits that you are entitled to under the workers’ compensation system. However, if your employer has inadequate coverage, or no coverage at all, you could miss out on benefits to which you are entitled.

If you have suffered a job related injury, or have lost a loved one as the result of a workplace accident, you may be entitled to Kentucky workers’ compensation benefits.

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