New York State workers’ compensation fraud may take many forms and result in a myriad of consequences. WLC § 114(a) not only governs circumstances of fraud but also describes significant penalties for those who are caught committing fraud such as a permanent ban on their eligibility to receive indemnity benefits and/or a permanency award.
WCL § 114(a) directs that a claimant is to be penalized if he or she “knowingly makes a false statement or representation as to a material fact . . . .” in furtherance of receiving workers’ compensation benefits. This mandatory penalty is a forfeiture of all compensation that is directly attributed to the false statement. Workers’ compensation fraud penalties only apply to indemnity benefits and permanency awards, paid medical benefits are not subject to forfeiture in a fraud determination. See Jacob v. New York City Transit Auth., 26 A.D.3d 631, 809 N.Y.S.2d 618 (App. Div. 2006); Matter of Robinson v. Interstate Natl. Dealer, 50 A.D.3d 1325 (3rd Dept. 2008).
Pursuant to WCL § 114(a):
“If for the purpose of obtaining compensation pursuant to section fifteen of this chapter, or for the purpose of influencing any determination regarding any such payment, a claimant knowingly makes a false statement or representation as to a material fact, such person shall be disqualified from receiving any compensation directly attributable to such false statement or representation.”
New York Workers’ Compensation Law § 114(a).
With regard to the legal definition of a “false statement or representation of a material fact,” the New York Court of Appeals in Losurdo v. Asbestos Free, Inc., held that “Section 114-a(1) places no comparable limitation on materiality . . . .” and that a fact is “material for purposes of Section 114-a(1) so long as it is ‘significant or essential to the issue or matter at hand.’” Losurdo v. Asbestos Free, Inc., 1 N.Y.3d 258 (3rd Dept. 2003).
Further, the Court held that if a claimant has made a false statement or representation as to a material fact that person shall be disqualified from receiving benefits and in addition to the mandatory penalty, § 114-a(1) grants the Board discretion to impose an additional penalty upon the claimant such as disqualifying the claimant from receiving future wage replacement benefits. Id. at 264. In addition, while the mandatory penalty requires a link between the falsehood and the forfeited compensation, the Board may impose a discretionary penalty (such as the disqualification of future benefits) for the violation of the statute whether or not the claimant is subject to the mandatory penalty, in other words, regardless of whether the false statement or representation enabled the claimant to receive compensation. Id. at 266-67.
In the Matter of Adams v. Blackhorse Carriers, Inc., which was decided in September 29, 2016, a claimant appealed from a New York State Workers’ Compensation Board’s determination that he violated WCL § 114(a) and disqualified him from receiving future workers’ compensation benefits.
The claimant suffered a compensable work related injury to his lower back in 2007 and was awarded workers’ compensation benefits from January 2008 through September 7, 2010. In November of 2009 the claimant was convicted of the criminal sale of a controlled substance in the third degree and on September 7, 2010 he was sentenced to a prison term of three (3) years.
The claimant did not receive workers’ compensation benefits during his jail term, but upon his release he sought the reinstatement of his workers’ compensation wage benefits. The employer objected to the reinstatement of benefits pending litigation that the claimant committed fraud under WCL § 114(a) by testifying in June of 2010 that he had not received any income while receiving workers’ compensation benefits when he had been convicted of the criminal sale of a controlled substance during that time.
The Workers’ Compensation Board penalized the claimant by rescinding prior awards and by imposing a discretionary penalty disqualifying the claimant from receiving any future wage replacement benefits for his claim. The claimant appealed from the decision.
On appeal, the New York State Appellate Division determined that the claimant had committed fraud under the statute because when questioned in June of 2010 as to whether or not the claimant had worked and/or received income since April of 2009, the claimant testified that he did not, despite being convicted of the criminal sale of a controlled substance during that time thus making a false representation regarding material facts for the purpose of obtaining wage replacement benefits.
With respect to the additional discretionary penalty of disqualifying the claimant from receiving future benefits, the Appellate Division held that the Workers’ Compensation Board is specifically authorized under the statute to impose such a penalty and therefore the Court did not disturb the penalty.
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