How to Avoid Workers’ Compensation Audits

Advanced Tools Assure Regulatory Compliance

White Paper from Liberty Bay Consultants, LLC
by Ted Carlson, CFE

I am a Certified Fraud Examiner with Liberty Bay Consultants, LLC specializing in Workers’ Compensation external audits and compliance programs. I worked six years with the Labor and Industries Workers’ Compensation Department in Washington State as a Field Auditor and trained Field Auditors and managers in business industry methods of operations.

With the changes in compliance reporting and auditing policies after 2009, we have developed national classification audit review programs and web-based compliance calculators on the cloud and that ensure workers’ compensation compliance in all 50 states.


A lot has been said about employee workers’ compensation, but very little about what affects the employer. Most conversations talk about business risk classes, but nothing on how to save money on workers’ compensation premiums payable to the State or insurance company. In Washington State, premiums are paid directly to the government on a quarterly basis. But no one checks to see if the assigned classifications are correct. Most employers consider this tax a burden to the company and tolerate it.

Since implementation of the new record keeping reporting requirements in 2009, accounting programs do not have the capability to capture all the new and revised compliance rules and regulations. Most payroll company programs cannot capture multi-classification reporting that can save you money. Most accounting professionals do not survey their clients to ask if they have been audited, nor do associations. Because most state workers’ compensation funds are underfunded, they will use aggressive auditing methods to generate new taxes.

If you know anyone who has been recently audited, you know the pain they went through screaming: “I had the right hours but they penalized me on how they were kept!” It is time to learn about the usage side of business classifications assigned to your companies and ensure regulatory compliance.

A home installation satellite company did not keep sufficient records for their most hazardous business classification: tower work. During the audit, all their hours were assessed in this one classification that was six times the reported amount. The auditor did not know the tower work required State safety training before the work could take place and ignored this documentation.

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