Failure to Disclose Earnings From Home-Based Business is Violation of NY Fraud Statute
Where a New York workers’ compensation claimant testified that he had not worked after a specific date and also represented to a carrier’s medical consultant that he had stopped working but, in fact, he had continued to perform work for a home-based business through which he crafted and sold custom knives, the state’s Workers’ Compensation Board appropriately found that the claimant had violated N.Y. Workers’ Comp. Law § 114-a and should be temporarily disqualified from benefits, held a state appellate court [Matter of Sausto v. Wildlife Conservation Socy., 2022 N.Y. App. Div. LEXIS 5252 (Sept. 29, 2022)]. The appellate court also found substantial evidence supported the Board’s decision that, due to the limited nature of the misrepresentation, the claimant did not deserve an additional discretionary penalty.
Background
The claimant sustained injuries in April 2019, while working as a plumber. He was awarded workers’ compensation benefits at a total disability rate from November 2, 2019 to December 3, 2019, then at a partial disability rate from December 3, 2019 to January 27, 2020, and, after his January 27, 2020 surgery, at a total disability rate.
In May 2020, the claimant filed a request for further action based upon his concurrent employment, and applied for an increase in benefits, submitting PayPal logs showing his receipt of payments to FS Blades, a business in which he crafted and sold custom knives. The employer and carrier raised the issue of whether claimant had made material misrepresentations related to his work activities and physical abilities with regard to FS Blades, while being paid at a total disability rate, in violation of N.Y. Workers’ Comp. Law § 114-a.
WCLJ and Board Find Violation of § 114-a
Following a hearing, the WCLJ found that claimant violated § 114-a and imposed a mandatory penalty of disqualification from benefits for the period of November 2, 2019 through October 2, 2020. The WCLJ also imposed a discretionary penalty of disqualification from future benefits. On claimant’s appeal, the Board agreed that claimant had made material misrepresentations in violation of § 114-a (1) by testifying in May 2020 that he had not performed any work since November 2, 2019 and by telling the carrier’s medical consultant on December 3, 2019 that he had stopped working, when claimant’s later testimony established that he had continued to perform work for FS Blades during that period. However, the Board modified the WCLJ’s decision by imposing a mandatory penalty disqualifying claimant from benefits only for the period of November 2, 2019 through December 3, 2019, and found that a discretionary penalty was not warranted. The carrier appealed.
Appellate Court Decision
Initially, the appellate court observed that the record fully supported the Board’s finding that claimant violated N.Y. Workers’ Comp. Law § 114-a. The court noted claimant’s testimony that when he was advised that he might need surgery, his activity was limited to shipping out orders already completed, prepaid orders for FS Blades, emailing customers whose orders he could not complete, and shutting down the website to further orders. The court said the record supported the Board’s factual finding that there was no evidence that claimant completed any sales or manufactured any products after that time interval.
The court also noted the Board’s finding that, after crediting claimant’s testimony, his minimal social media presence on behalf of FS Blades from November of 2019 forward did not represent work on behalf of FS Blades. The court indicated that a different inference could have been drawn from that testimony and the documentary evidence, yet under settled law, the Board had broad authority to resolve factual issues based on credibility of witnesses and draw any reasonable inference from the evidence in the record. Moreover, the Board had broad discretion in imposing the discretionary penalty of permanently disqualifying a claimant from receiving future benefits. Here, the Board found that a discretionary penalty was not warranted in that claimant disclosed the existence of his business and the income derived therefrom and, when questioned, he was forthcoming and testified consistent with the conclusions reached in the carrier’s investigative report. Upon review of the record and the claimant’s testimony, the court could not say that the claimant’s conduct was so egregious, flagrant or pervasive to compel the Board to disqualify him permanently.