The Most Common Employee Workers’ Compensation Fraud Schemes

Workers’ compensation fraud costs between $35 billion and $44 billion annually, according to the 2025 workers’ comp study from Conning, an investment management firm for the insurance industry. 

The U.S. Department of Labor, which investigates workers’ compensation fraud, defines the act as intentionally failing “to disclose reportable employment or income, falsify or report fraudulent medical information, or claim to be injured or disabled when in fact they are not.” When it occurs, workers’ comp fraud not only raises insurance premiums for businesses, but it also can result in civil and criminal penalties. 

While a claimant may not have intentionally committed fraud, others are motivated because of their financial situation, job dissatisfaction, or fear of layoffs. 

Understanding the most common types of employee workers’ comp fraud and indicators for each will help you determine when to turn to outside expert help from leading national providers of insurance claim validation.  

When an adjuster has suspicions or questions about a workers’ compensation claim, they can enlist the help of experts like those at VRC Investigations, a leading national provider and single-source solution for investigative, SIU, and regulatory compliance needs. 

Malingering  

Malingering refers to prolonging or exaggerating symptoms from a legitimate injury. It typically occurs after a normal recovery period and could last for years. Motivations for this type of workers’ comp fraud range from pursuing a larger settlement to avoiding a return to work. 

Potential red flags that could signal malingering include the claimant avoiding or refusing diagnostic procedures and inconsistencies in their description of what caused the reported injury. Malingering also tends to focus on soft-tissue injuries that are more subjective in nature. 

Working While Collecting  

A 2025 Online Fraud Insights report by the insurance data research and development organization Carpe Data found that nearly 60% of a claimant’s flagged content online connected them to a business other than their main employer—often suggesting the person “may be working elsewhere or running a side business while collecting injury-related benefits.”  

Outside employment could be anything from a similar job in the same industry to a side gig with a ride-share or food delivery service—essentially any work that hasn’t been disclosed or requires tasks that exceed the claimant’s reported restrictions. 

A qualified investigative services provider like VRC Investigations can verify whether there is the possibility of working while collecting a settlement by identifying unexplained income, noticing a pattern of the claimant’s vehicle being away from home during work hours, or discovering online evidence that shows the claimant working at another place of business. 

Non-Work Injuries  

In this scheme, a claimant could be legitimately injured outside of work, but with an injury that could have plausibly occurred in the work setting. 

A non-work injury scheme occurs when a claimant reports an injury, like pulling a muscle, occurred during their shift at the jobsite when it actually happened at the gym during their personal time.

Indicators of a non-work injury claim include a lack of witnesses to the causal event, reporting on Monday morning, making the claim after being terminated, or an injury consistent with recreational activities. 

Monday effect claims have been studied since the late 1980s, and more recently, a 2021 dissertation presented at Florida International University looked at the phenomena known as “Fraudulent Monday Effect Claims.” In surveying more than 500 adults, the study found that “injury type and level of fraud acceptance may predict the likelihood of a Fraudulent Monday Effect Claim filing.” 

 Fabricated Injuries  

An employee who fabricates injuries (files claims for an injury that never occurred) typically goes through four steps to build validity around their reported injury. 

The act of filing a false claim in and of itself is premeditated. Once filed, the claimant creates scenarios or falsifies documentation in an effort to prove the injury occurred.  

The claimant then submits the claim with the fabricated evidence and attempts to secure medical documentation of the alleged injury. 

Common injuries cited in this scheme are typically harder to diagnose. They may include backaches, headaches, whiplash, or muscle strains. 

A fabricated injury scheme could feature symptoms that are harder to diagnose, like whiplash, for instance. 

If the injury isn’t immediately reported to a supervisor, this could spur further inquiry. Other red flags include: no witnesses to the incident; the reported incident occurred in a work area without cameras, or an independent medical exam conflicts with the claimant’s version of events. 

Interviews with the claimant could reveal an inability to describe the incident in detail, while video surveillance could contradict statements made in the initial claim. 

 Pre-Existing Injury or Multiple Claims  

Another scheme includes filing repeated, similar claims. 

The claimant could have a prior injury they failed to disclose or a minor injury that gets progressively worse. Other red flags include an injury migrating to other parts of the body, which investigators typically see after an attorney becomes involved in a claim; denial of prior medical history; and refusing to sign medical releases. 

Claims involving pre-existing injuries or a history of similar past claims can be more complex to evaluate. It can be challenging to determine what portion of the current condition is truly related to the new incident versus what may be attributed to prior injuries or unrelated claims. This overlap often requires careful review of medical records, prior claim history, and objective medical evidence to sort out the facts and ensure the claim is legitimate. 

Understanding Workers’ Comp Fraud 

Workers’ comp fraud affects more than the individual—it affects a company’s bottom line, customer experience, and trust. 

With nearly three decades of experience, VRC Investigations has a team of licensed investigators who can deliver actionable reports that enable adjusters to make confident decisions related to potential compensability. 

If you’re ready to partner with VRC Investigations, submit an assignment today. 

Alpine Intel’s content is meant to inform and educate readers using general terms and descriptions. They do not replace expert evaluations that determine facts and details related to each unique claim.