Nailed: A fraud prevention and compliance blog

Written by Elizabeth Smith,
L&I's Assistant Director for
Fraud Prevention and
Labor Standards

Oct. 21, 2010

L&I expands fraud fighting efforts

Once upon a time, an honest Seattle flooring contractor grew frustrated at losing bid after bid to his competitors. How could they undercut his prices so drastically, when his prices were already cut to the bone?

The answer – his competitors cheat the system by dodging his state workers’ compensation insurance premiums.

While our hero played by the rules, he lost jobs to those who didn’t. Welcome to the so-called ‘underground economy’, where there isn’t a fairy tale ending.

This true story of Craig Munson’s business trials captured my attention when he brought me a list of his competitors who failed to pay workers’ comp insurance. It was staggering that so many failed to even open workers’ comp accounts with L&I.

This kind of fraud costs taxpayers and honest businesses millions of dollars each year.

L&I is cracking down

Of the 168,000 employers and contractors L&I provides workers’ compensation coverage for, really only a small portion commit fraud. Identifying the bad actors in the system can be like searching for a needle in a haystack.

L&I has invested in better technology and advanced analytics to find businesses and individuals breaking the law. Better fraud detection means more time spent going after the bad guys, and less time with those who play by the rules.

We are using IRS data and outside expertise to detect those who report more into the employment security system than they are reporting to L&I.

Our efforts are paying off

In fiscal year 2010, the total amount collected by our fraud fighting efforts was $137 million— a 46% increase since 2004, the year before L&I’s Fraud Prevention & Compliance program was established. L&I is averaging a return of eight dollars for each dollar invested in these efforts, and we expect these numbers to increase as we implement new fraud detection technology next spring.

For those frustrated employers around Washington, know your complaints are met with action. We know how tough it is in today’s economy, and we are doing all we can to level the playing field for honest businesses.

If you suspect fraud in the workplace, whether by businesses, workers or healthcare providers, contact L&I at (888) 811-5974 or on the web at All of your leads are investigated.

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In a tough economy, businesses are looking for ways to cut costs. Unfortunately, breaking laws is not a good way to go about it.

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