Beware: What happens to the client company when staffing agency lies to the Work Comp insurance

We've noticed worrying trend among some staffing firms, providing false information to workers' compensation insurance companies

At Timpl Staffing, we've noticed a worrying trend among some staffing firms. To reduce costs, they provide false information to workers' compensation insurance companies. This approach lowers their premium rates in the short term, but it's a risky strategy.

If an accident happens, the insurance might deny the claim because of this false information. This can lead to legal action against the manufacturer that uses the staffing firm, due to what's known as the dual employer clause. Additionally, wrong details about a company in the insurance system can damage that company's workers' compensation Experience Modification Rate (EMR). This rating affects insurance costs and the company's image.

This practice affects 3-10% difference in the markup quote staffing company provides to the employer

How do staffing Firms cut corners on Workers' Compensation costs?

• Misclassification of Job Roles: A staffing firm might incorrectly classify a high-risk job, such as a machine operator in a manufacturing setting, as a lower-risk administrative role. Since insurance premiums are partly based on the risk level of the job, misclassifying roles can unjustly lower the premiums.

• Underreporting Payroll: Workers' compensation premiums are calculated based on the total payroll. By underreporting the amount paid to employees, a staffing firm can reduce the base figure used to calculate its insurance premiums.

• Exaggerating Safety Measures: A staffing agency may claim that certain safety measures or programs are in place when they are not, or they may exaggerate the extent of these measures. This could lead to a lower risk assessment and thus lower premiums.

• Not Reporting All Claims: Staffing firms might avoid reporting smaller injuries or claims to the insurance company to keep their claim rate low, which can affect premium calculations.

What risks do employers face with staffing agencies cheating Workers' Comp?

• Legal and Financial Liability The insurer denies the claim due to fraudulent reporting. As a result, the client company may be held responsible for the injured worker's medical expenses, rehabilitation costs, and any legal fees associated with the claim under dual employer clause.

• Increased Insurance Premiums A client company's future insurance premiums can be adversely affected. If the staffing agency's deception is uncovered, both the agency and the client company could face increased rates due to the perceived higher risk and loss of trust from the insurance provider.

• Damage to Reputation Association with unethical practices can tarnish the client company's reputation. Businesses in the manufacturing sector rely on their reputations for reliability and integrity. Being linked to a staffing firm that engages in fraudulent activities can harm the client's brand and deter potential business partners and customers.

• Operational Disruptions If an incident occurs and the staffing firm's deception comes to light, the ensuing legal and financial complications can disrupt the client company's operations. Resources may have to be diverted to address these issues, impacting productivity and operational efficiency.

• Compliance Risks Employers are expected to ensure their contractors, including staffing firms, comply with all relevant laws and regulations. If a client company is found to be complicit or even passively accepting of the staffing firm's misconduct, it could face regulatory penalties and compliance issues.

• Employee Morale and Retention The workers, who may be employees of the staffing firm but work at the client company, can suffer low morale if they discover their employer is engaging in unethical practices. This can lead to high turnover rates, which are costly and disruptive for both the staffing agency and the client company.

How Timpl Manages Workers' Compensation

Timpl Staffing commits to accurate reporting and comprehensive coverage for workers' compensation. Our process involves:

• Detailed risk assessment of clients' operations.
• Securing quotes based on complete transparency.
• Opting for coverage limits over $1 million.
• Undertaking additional insurance measures.

Conclusion: The value of ethical Workers’ Compensation practice

Yes, this means our prices are about 3-10% higher, but we believe this is a fair price for the added security and peace of mind it brings to our clients. Choosing a staffing firm like Timpl, which prioritizes honest workers' compensation practices, protects your company from unforeseen legal troubles and maintains your operational integrity.