Wow.  This newest First DCA decision is a doozy, one that alot of us on the defense side have argued-to no avail-for a long time.  That is until now. 

In Fast Track Framing v. Marando Homes, the Court found that if a Claimant is paid cash under the table, and does not report those wages to the IRS as taxable income, the money will not be counted as “wages” and therefore cannot be calculated in Claimant’s average weekly wage (AWW).  The AWW is used to determine how much Claimant is paid in wage loss benefits when she is taken off work.   So, if a Claimant is earning unreported cash, then his AWW is $0.00. 

Naturally, this is a boon for Employer/Carriers.  It limits their exposure to purely medical benefits.   But, the Fast Track case is not a total windfall to E/C’s.  This case can be a double edged sword that opens up an entirely new set of legal exposures to the Employer.

First, and I am not a tax attorney,  the Employer can expose itself to federal tax liability.  An Employer admitting under record, in a court of law,  that they pay employees cash, under the table, is sure to set off plenty of alarms at the IRS for unreported payroll taxes.  

Second, the W/C statute contains a lengthy fraud provision that does not just cover actions by Claimants.  Section 440.105(4)(b)6 states that it is unlawful for any person (ie. Employer):

to knowingly misrepresent or conceal payroll. . . which would be material to the computation and application of an experience rating modification factor for the purpose of avoiding or diminishing the amount of payment of any workers’ compensation premiums.

In other words, paying employees under the table can be used to show an Employer is skirting W/C premiums, a form of insurance fraud.  This would put the Employer in direct conflict with their Carrier.

Third, as Judge Padovano writes in his dissent in Fast Track, this desision will be used against illegal aliens, another form of legal exposure to Employers if they apply this defense.   This exposure may be minimal considering how hard it is to prove an Employer knowingly hired illegals (a potential employee can give false documentation), it is yet another issue for an Employer think about before considering this course of action during litigation.

Overall, this case will limit the wage loss exposure in a W/C claim, but an Employer has to look long and hard at itself in the mirror to insure that its hands are clean, otherwise it can come back to bite them. 

In the end, is it worth denying W/C benefits if it brings a host of major legal problems?