After four years of battling a reportedly fraudulent workers’ compensation claim, one Washington construction business has decided to drop the case to avoid further financial loss.
Although the Department of Labor and Industries (L&I) touts a robust workers’ comp and claim investigation system, Seattle-based Thomas Fragnoli Construction was unable to close one reportedly fraudulent claim through L&I, despite having video evidence and self-admitted fault by the former employee.
The business has been paying on an injured worker’s medical bills since 2013. Sometime after the incident, the worker told the business he had been claiming L&I benefits while working under the table, and the company’s private investigator caught him working on a roofing project while on disability leave. According to owners Christopher Thomas and Paul Fragnoli, their business was still receiving L&I bills on this claim six to eight weeks ago.
“Our hope is as this claim slides off our record… this business becomes more profitable,” said Fragnoli. “What it’s meant over the few years is we’re making a living, but we certainly wish things could be better.”
“Our ability to increase pay rates and still remain profitable or break even has been difficult because L&I rates have gone so high for us,” he added.
Fragnoli said he would like to see the department implement checks and balances and also expand its efforts to prove the legitimacy of reported fraud claims.
“There seems to be a culture there that’s kind of broken,” said Thomas. “Even if you go review the language on the claims forms… it’s an endless list of nomenclature and jargon that doesn’t mean anything to the average person. The whole structure of it is obtuse.”
Washington state lacks a private workers’ compensation option, so most business buy into L&I’s system. Employers pay premiums based on their “experience rating,” that is, how well they handle claim costs within their industry.
L&I then assigns companies “experience modification factors” which the department multiplies to the L&I hourly rate per worker to calculate workers’ comp insurance premiums. Too many unresolved or expensive claims can increase that factor, which directly influences the amount of premiums an employer pays.
This factor can also determine which construction companies are awarded a project, as it is commonly used to indicate the level of a company’s safety standards.
Over the past three years, the business’ L&I premiums per employee have gone up about $6 an hour, according to Fragnoli.
“It makes is difficult to maintain higher-end employees, because if you can’t give the rates that are the industry standard then it certainly makes (employees) want to go elsewhere,” he added.
According to Fragnoli, any barriers to increasing pay rates makes it challenging for a business of 25 to 30 people to retain its staff or replace a worker while still meeting project deadlines.
“The market is busy, and attracting employees at this point all comes down to compensation offerings,” said Fragnoli.
The business’ experience rating through 2017 will remain as it has been, which includes the adjustment from the outstanding claim, said Fragnoli.
The company will finish paying off the premium increases by the end of the year, but the company’s experience rating will not return to normal the following year, he continued, as it takes three to four years to decrease.
According to Natalee Fillinger, the company’s attorney on this case and a former self-insured program manager for L&I, the state’s highest claims cap is $270,000, and Thomas Fragnoli Construction’s case was reserved at $240,000.
She added that L&I indicated it would appeal the case higher up in the department should the company continue its pursuit.
Fragnoli said: “At the end of the day, $35,000 over the course of six months was less than paying Natalee $35,000 to $40,000 and still having to pay the reserve… for a losing case.”
According to Fragnoli, L&I declined their “gentle offer” to roll back the company’s experience rating without the business requesting retroactive compensation to recover what they had paid.
“We’ve got work to do besides monkeying around with the state and trying to dig in its obtuse ways of doing things,” said Thomas. “At some point, you say ‘fine, we will pay out the rest of the money you will squeeze out of us,’ and we will move on.”
On July 11, Fillinger sent in the company’s dismissing appeal to close the case. L&I stopped taking time loss for future premium rates, “but the case is at near max and the business has already paid premiums,” said Fillinger. “This decision didn’t save them anything.”
“If fair was fair, they’d return us to where we were” in terms of the company’s experience rating, said Fragnoli.
Over the duration of the case, Fragnoli said the company paid increased premiums and tens of thousands of dollars on attorney fees and surveillance. Fragnoli said they would like to have their experience rating rolled back for an extra $6 per hour on 15 employees.
“In some ways, you just want the precedent to change so that other people that are in our shoes have the ability to have some leverage,” he said.
“The state needs oversight,” said Fragnoli. “They need independent oversight of the system, because they are investigating themselves and have absolutely zero motivation to go do that.”
Said Thomas: “Not to say L&I doesn’t provide a service for employees, but when you have people that want to take advantage of the system there is really no reasonable way to stop them.”
Fragnoli recommends that any business owner opting into L&I workers’ comp should educate themselves on the system. The most important thing is to understand what to do when a claim comes through the door, he added.
Employers should pick up the phone and find out the threshold for their business’ experience rating, he said. The department assigns a certain dollar value for workers’ comp claims, and if a small claim is under the set amount, it will not affect the business’ experience rating.
Also, “knowing who to call and what questions to ask and when to push back,” said Fragnoli. “The reality is we didn’t know how hard to push back in the beginning. We are advocates for employees and want them to get healthy and back to work.”
“Rightly or wrongly, we assumed that L&I would be acting as a neutral arbitrator of these things and assumed they had our interest in mind as much as employee interests in mind, which it turns out is absolutely wrong. The employee’s first is fine. At a certain point, our voices weren’t heard at all.”
L&I declined to comment directly on Thomas Fragnoli Construction’s case.
This is the fourth and final installment in a series of stories regarding Washington’s workers’ compensation system and its effect on the business community. Read the previous stories here, here and here.