In this month’s issue:

• Are You Next On The Audit List? (Employer Workers’ Compensation Fraud)
• OTC Drug Abuse! (Effects on the Workplace)
• Recent Federal and State Changes
• Spanish Posters
• Custom Posters

The rising cost of Workers Compensation may seem unfair, but avoiding it through dishonest tactics will cost you a lot more if you’re caught.

Are You Next On The Audit List?
By Patricia A. Kotze-Ramos

A California company found what they thought was a unique and clever way to cope with and lower their rising cost of workers’ compensation…they lied. In fact, they totally misrepresented the identity of their workforce and their roles within the company. Instead of reporting the employees as laborers, drivers or construction workers, they characterized them as clerical or sales associates. As often happens with misrepresentation, the company’s owners were surprised with an audit from their workers’ compensation carrier and the misclassifications were discovered.

In cases of such fraud, company owners have been investigated and convicted of felony workers’ compensation fraud. Those found guilty have been sentenced to years of probation and ordered to pay fines well into the six figures. Keep in mind that when you lie about the number or role of your employees, you’re committing fraud against the Employment Development Department and the Franchise Tax Board.

As president of a workplace investigation company, I recently had the opportunity to do some research on Workers’ Compensation as it relates to the rising costs to employers, especially California based businesses. I came across some interesting information comparing fraudulent reports of employees vs. those of employers exploiting the system. Employer fraud is significantly on the rise. The estimate of premium fraud is in the millions, and the deceitful employer puts the honest ones at a competitive disadvantage.

The Insurance Department refers to employer fraud as one of the fastest-growing problems in workers’ compensation. Reports estimate that one in every four companies misclassifies their workers to illegally cut costs. Another form of employer fraud in this area is to under report the number of employees, paying under the table, or eliminating the insurance all together--by not buying coverage at all.

Putting an accurate number to this area of fraud is difficult because of the underground economy. California Employment Development Department estimates the underground economy to be between $60 – $140 billion annually. A joint enforcement strike force led by the EDD conducted over 1100 investigations in several different industries, and identified $245 million in unreported wages in 2002.

A recent investigation involved the Underground Economy Task Force, the Franchise Tax Board, EDD and a San Diego County-based construction company. State Fund actually was awarded $800,000 in the workers’ compensation insurance and tax evasion case. The owners of the fraudulent company, Covington and Huffman, were ordered to pay a total restitution of $1.2 million, and serve up to 5 years and 5 months jail time in state prison and 4 years probation. Formal sentencing is scheduled to take place in San Diego County Superior Court.

Fighting Workers' Compensation fraud is a team effort. Without the employer’s honest involvement, the overall campaign to stop Workers' Compensation fraud will not be successful. Premium fraud is only a portion of the problem but a growing and significant one: it’s not just the employee anymore…

About the Author:
Patricia A. Kotze-Ramos is President of Diversified Risk Management, Inc. a nationwide Investigation Firm specializing in workers’ compensation fraud and workplace investigations. 800.810.9508

click to enlarge Osha Safety Poster

April 27, 2004

The Season of OTC Abuse has begun — Are you seeing the signs?
By Patricia A. Kotze

Johnny was frequently sick at work. And as such, Johnny always had stuff in his desk drawer and often visited the company’s first-aid-kit. Johnny was seen popping pills, drinking unknown tea concoctions and shots of cough syrup. In the workplace, we the employers have always been concerned with the on-company time and property use, sale and or distribution of marijuana, cocaine and speed. But today, Sudafed, Vicks, Robitussen, and Tylenol Cold pills could be the newer, cheaper, over the counter (OTC) legally abused drugs, vitamins, and other type homeopathic remedies, and they’re being used right in front of our faces.

In prescribed or responsible doses these OTC’s will help in the curing process but in large doses it can cause heart attacks, seizures and in some circumstances death. Roboting or euphoria is the intended feeling for why these medicines are abused by people at work or in social settings. The attractive ingredient is DXM (Dextromethorphan Hydrobromide, DXM HBr) which is classified with dissociative anaesthetics. These OTC’s come in ready to use forms, pills, tablets (to ingest or chop/snort), powder and the favorite, syrup. Heavy users of the syrup brands have been known to ingest about 3 – 4 bottles daily.

DXM can be purchased wherever cough suppressants are sold and in a pure form as a pill in Mexico and in all forms over the Internet. Additionally, the Internet provides easy to find instructions on how to extract DXM from gel-caps and syrups and thus enabling the person to ingest it orally (perhaps in soda or coffee) or to even inject it directly into ones system as heroin started its popularity in the 60’s.

In the 60’s, DXM replaced codeine and some of the opiates which were being abused by people then; so it’s been around for a long time. But today it is popular with the younger adults and adolescents and for the same reasons_it is easy to find and buy.

The effects of this type of high lasts for 4-8 hours depending on how it is ingested into the system and the form the DXM is in. Because of the side effects and the withdrawal symptoms which can be everything from vomiting to weight loss, addiction is not usually an end result. But as with other drugs, it may lead a person down the road to finding the ultimate drug for consumption and the high. Another method of use is when DXM is extracted and then mixed with MDMA (Ecstasy) or special K to produce a more intense experience and I don’t mean the cereal…

Future legislation may require identification henceforth for proof of age to purchase these basic OTC drugs. Certain measures have already been taken with the elimination of Efedra in weight loss pills and some abused steroids have been restricted from the high profile, semi- and professional athletes’ use while.

In addition, this recreational abuse of the DXM has now tweaked the attention of many local, state and federal officials to increase the monitoring of its use and warnings to the consumer. They may pull it from the counters and place it back on the Controlled Substances Act (CSA) list of 1970 if the abuse warrants it’s rescheduling. As employers, our front-line supervisors need to be vigilant towards the consumption of these OTC’s by our employees. It is also our responsibility to institute appropriate substance abuse policies with the assistance from an employment law attorney. What we don’t want to be accused of is enabling Johnny to become an abuser or a long-term addict. But then what happens to those of us who use OTC’s responsibly_is it back to moms’ homemade chicken soup?

About the Author: Patricia A. Kotze is President of Diversified Risk Management, Inc. a nationwide Investigation Firm specializing in workers’ compensation fraud and workplace investigations. You can learn more by visiting www.DiversifiedRiskManagement.com or calling her at 800.810.9508.

click to enlarge OshaDrug Free poster

These posters comply with all state and federal labor law regulations.

Product #
FD180E DRUG FREE WORKPLACE – ENGLISH $10.95
FD180ES DRUG FREE WORKPLACE – BILINGUAL $10.95
FD180S DRUG FREE WORKPLACE – SPANISH $10.95

Recent FEDERAL and State Changes:

• Federal Family and Medical Leave
  
• Federal Employee Polygraph Protection Act
  
• Federal OSHA poster
  
• Federal Equal Employment Opportunity is the Law
  
• California effective 1/2004
  
• Louisiana effective 12/2003
  
• Illinois effective 1/2004
  
• Maine effective 12/2003 (If you have our Maine 9/2003 poster with color postings you are still in compliance with Maine’s labor laws)
  
• New Jersey effective 2/2004
  
• New York effective 2/2004
  
• North Dakota effective 12/2003
  
• Oregon effective 1/2004
  
• Rhode Island effective 1/2004
  
• Vermont effective 1/2004
  
• Washington effective 1/2004
  

SPANISH POSTERS – Does Your State Require Spanish Posters?
We have added more posters in Spanish! We now have a total of fifteen.
Many states require employers with Spanish-speaking employees to post the State and Federal labor laws in Spanish. Others highly recommend posting in Spanish to ensure that your employees understand their rights and the labor laws. To fulfill the needs of many employers, CPC has available Spanish posters for the following states:

CUSTOM POSTERS
Many larger companies are taking advantage of CPC’s exclusive “Custom Poster Program.” This program allows organizations to incorporate their logo, company colors, mission statement and even some custom verbiage into the design of the poster. Posters can be specially designed to specific size requirements, horizontal or vertical orientation, and with heavy lamination, etc.

For more information, please contact your Compliance Poster Representative at
1-800-817-7678 or at with customer service online.