Washington L&I Sees Dramatic Increase in Recovery of Unpaid Work Comp Premiums

September 14, 2004

Three years after it launched an initiative to level the playing field among employers in the construction industry, the Department
of Labor and Industries (L&I) has seen a dramatic increase in the amount of unpaid workers’ compensation premiums it identified and collected.

In fiscal year 2004, which ended June 30, L&I collected more than $4.5 million in insurance premiums that had not been reported and paid by construction employers. That figure represents a 42 percent average increase over dollars found and collected in the prior three years.

L&I’s Tax Discovery Initiative grew out of the frustration expressed by
contractors who found themselves competing against companies that weren’t registered and accurately reporting hours worked and, therefore, weren’t paying the workers’ compensation premiums they owed. Employers complained that the unlevel playing field put them at a competitive disadvantage.

L&I’s efforts to level the playing field date back to July 2001 when the
agency targeted residential wood-framing contractors who weren’t reporting hours worked and paying premiums. The Tax Discovery Initiative expanded that scope to all construction trades. The agency also is working with employers to reduce the number of construction-related injuries. By reducing injuries and bringing more contractors into compliance with the law, the agency expects to hold down rates and spread premiums more broadly across the construction industry.

L&I Director Paul Trause said the agency focused on the construction
industry because audits found that half of all unregistered employers were working in construction.

“It’s a matter of fairness and maintaining the integrity of our workers’ compensation system,” Trause said. “The high incidence of noncompliance, plus the number of injuries and the cost of claims in construction, led to premium rates that are generally higher than other industries. And we think that provided a greater incentive to cheat.”

L&I’s Tax Discovery Initiative is part of a broader effort by the agency
to crack down on fraud and abuse, return injured workers to a job they are capable of doing as soon as is medically appropriate, and improve the management of workplace-injury claims. The anti-fraud effort targets workers, employers and health-care providers who cheat the workers’ compensation system.

That system provides industrial insurance coverage for about 160,000
employers and 1.9 million workers. In addition to providing benefits to
injured workers, the system protects employers from the cost of claims that can last a lifetime, and from tort lawsuits that could result from workplace injuries.

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