Fraud Requires Knowing Misrepresentation

Fraud Requires Knowing Misrepresentation

Posted: July, 2012

State ex rel. McBee v. Indus. Comm., 132 Ohio St.3d 209, 2012-Ohio-2678.

Issue: Did the Industrial Commission properly find that an injured worker committed fraud when he engaged in unpaid activities, which the Commission found constitute work, while receiving temporary total?

Background: McBee helped his wife at her business while receiving temporary total. He did not receive any pay for his activities. The Industrial Commission found that the activities McBee performed constituted work and terminated temporary total. The Industrial Commission also found that McBee committed fraud by certifying that he was not working during that time.

McBee filed a mandamus challenge to the Industrial Commission’s decision. The Court of Appeals granted a writ, finding that McBee did not commit fraud. The Industrial Commission appealed.

Decision: Supreme Court affirms.

When determining whether someone receiving temporary total has worked, the term work usually means “labor exchanged for pay.” Sometimes, unpaid activity constitutes work. The Court identifies the type of unpaid activity which constitutes work for temporary total as “activities that are not minimal and that directly generate income for a separate entity.” McBee’s actions were not minimal and directly generated income for his wife’s business. Therefore, his activities were “work” which barred temporary total. McBee did not challenge that conclusion. The only issue before the Court involves whether the Industrial Commission validly decided that McBee engaged in fraud by certifying that he was not working while receiving temporary total.

Fraud only occurs when someone makes “a knowing misrepresentation of a material fact.” The issue is whether the evidence demonstrates that McBee knowingly misrepresented that he was not working while receiving temporary total.

The Court finds that the evidence does not support finding fraud. The form McBee signed only indicated that McBee was “not permitted to work” while receiving temporary total. It did not define work, or notify McBee that unpaid activities could constitute work. The Court states:

Ultimately, there is no evidence that McBee knew that his unpaid activities constituted work that would preclude TTC. Thus, there is no evidence that he knowingly misled the commission or the bureau. Absent such knowledge, a fraud declaration cannot stand.

Editor’s Comment: The Commission has a tendency, any time it terminates temporary total because an injured worker “worked”, to also find that the injured worker committed fraud. As this decision recognizes an injured worker may unwittingly engage in activities that are technically considered work by the workers’ compensation system, but that the injured worker would not recognize as work.

This decision makes clear that fraud requires more than just working while receiving temporary total. The injured worker must also know that the activities they perform would make them ineligible for temporary total compensation. Absent such knowledge – and evidence of such knowledge – the Industrial Commission cannot find that the injured worker committed fraud.

Information courtesy of the Ohio Workers’ Compensation Bulletin. Subscribe to the Ohio Workers’ Compensation Bulletin to keep informed about the Ohio workers’ compensation system.