Mitigating the Risk of Fraudulent New York Labor Law Claims

New York contractors operate in one of the most complex legal environments in the country. Between strict labor laws and workers’ compensation requirements,  the risk of fraud has become an ongoing challenge for those working to stay competitive and compliant.

In recent years, fraud connected to labor law claims has grown more sophisticated, with ripple effects that drive up costs, slow projects and put legitimate contractors at risk.

Understanding Fraudulent Workers’ Compensation Claims

One of the biggest areas of concern for contractors in New York is workers’ compensation fraud. Contractors have seen cases where multiple employees from different jobsites report nearly identical injuries, are prescribed the same medications and file claims through the same medical providers. These “cookie-cutter” claims often lack credible documentation, yet still move through the system, costing employers time and money to investigate and contest.

Doctors, clinics and third parties involved in these claims are sometimes motivated by volume rather than accuracy. The result is a surge of questionable injuries and treatment plans that inflate claim counts and premiums for contractors.

Fraudulent Labor Law Case Examples

Example #1: Staged Construction Accidents

A lawsuit filed earlier this year lays out a full-scale conspiracy in the New York metropolitan area. A specialty insurance managing underwriter alleges that a network of runners, lawyers and medical providers staged fake construction site accidents. Workers were recruited into the scheme, drilled on exactly what injuries to claim and directed to complicit doctors who provided tailored documentation for their claims. The suit alleges this fraud netted millions in workers’ compensation and personal injury payouts.

Example #2: False Payments to Doctors and Fraudulent Work Injuries

Additional cases flagged by the New York State Inspector General show the severity of the issue. In 2024, investigators uncovered about $2.7 million in workers’ compensation fraud, up almost 30 percent from the year before. One fraudulent billing provider diverted over $1.9 million from insurers through schemes involving falsified payments to doctors. There were also several arrests, including a correctional officer who was found working as a bus driver while collecting wage benefits.

How Contractors Can Combat Workers’ Compensation Fraud

Fraud tied to labor law claims doesn’t only affect insurers. Contractors face higher premiums, legal expenses and lost productivity. Projects can be delayed if fraudulent claims take workers off the job and force company resources into depositions or court appearances. For smaller firms, even a handful of fraudulent claims can tip the balance sheet.

Contractors in New York can protect themselves by using the following best practices:

• Implement strong reporting and documentation practices: Every injury, no matter how small, should be documented immediately. Photos, witness statements and jobsite records can make the difference between a legitimate and illegitimate claim.
  
  
• Build relationships with reputable medical providers and legal advisors: Work with reputable medical providers who will provide accurate, objective diagnoses and treatments for employees. In addition, trustworthy legal advisors can help you identify suspicious claims, understand regulations and protect your business against fraud.
  
  
• Conduct internal audits: Look for unusual patterns like repeated claims tied to the same provider or multiple employees filing similar injuries in short succession.
  
  
• Train site supervisors: Site supervisors should enforce safety protocols at jobsites, such as removing tripping hazards and ensuring the use of personal protective equipment, to prevent unnecessary accidents and reduce the frequency of workers’ compensation claims. In the event of an accident, supervisors should know how to complete timely, accurate reporting for injuries.
  
  
• Use defense MRIs or diagnostic testing: Contractors can conduct their own medical tests through trusted clinicians to validate or challenge suspicious treatment claims.

Alliant Construction: Your Trusted Partner in Mitigating Fraud

Fraudulent claims under New York labor laws are not going away, posing significant financial and reputational harm to contractors in today’s complex regulatory environment. By strengthening documentation, working with trusted partners and staying alert to suspicious patterns, contractors can protect their operations long-term and move projects forward.

At Alliant Construction, our industry specialists bring extensive experience in preventing and managing fraudulent workers’ compensation claims. We ensure you have the right coverages and risk management strategies in place to safeguard against fraud and assist with proper claim reporting. Contact a member of the Alliant Construction team today to learn more about risk management strategies and how to identify potential fraud before it impacts your business.