An employer that suspects an employee is faking a work injury has a legal path, but it runs through the insurer and the fraud statute, not through discipline. Insurance Code section 1871.4(a)(1) makes it unlawful to make “a knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation.” The statute reaches employers too. Acting on suspicion alone, by firing or threatening the worker, invites a retaliation claim under Labor Code section 132a.
What does section 1871.4 prohibit?
Knowingly false material statements in the comp system. Section 1871.4(a) covers false statements made to obtain or deny compensation, false statements presented “in support of, or in opposition to, a claim,” and anyone who would “Knowingly assist, abet, conspire with, or solicit a person” in those acts.
“Statement” is broad. The statute says it includes “a notice, proof of injury, bill for services, payment for services, hospital or doctor records, X-ray, test results,” and other evidence of loss or injury. The key word is “knowingly.” An exaggerated description of pain, or a claim the employer simply doubts, isn’t fraud without proof of a knowing falsehood.
Does the fraud statute apply to employers?
Yes, and that’s easy to overlook. The same subdivision covers statements made “for the purpose of obtaining or denying any compensation.” Section 1871.4(a)(4) separately bars “a knowingly false or fraudulent statement with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim.”
So a supervisor who tells an injured worker the injury “isn’t covered,” or who backdates a report to make a claim look late, creates exposure for the company. The safer course is for managers to report facts to the insurer and say nothing to the worker about whether the claim is valid.
What penalties does section 1871.4 carry?
Criminal ones. Under section 1871.4(b), a violation is punishable by county jail for one year or a felony term of “two, three, or five years,” or “a fine not exceeding one hundred fifty thousand dollars ($150,000) or double the value of the fraud, whichever is greater,” or both. Restitution is mandatory.
Prosecutors bring these cases, not employers. The employer’s role is to give the insurer accurate facts and let its fraud process run.
Can an employer fire a worker it believes is faking?
Not because of the claim. Labor Code section 132a(1) says an employer that “discharges, or threatens to discharge, or in any manner discriminates against any employee because he or she has filed or made known his or her intention to file a claim for compensation” is guilty of a misdemeanor. The worker’s compensation “shall be increased by one-half, but in no event more than ten thousand dollars ($10,000),” plus reinstatement and lost wages and benefits.
A firing tied to suspicion of the claim looks like a firing tied to the claim. A decision based on documented, independent reasons, such as a pre-existing performance record or a policy violation unrelated to the injury, is far easier to defend. Timing and paper trail usually decide these disputes.
Comp fraud rules at a glance
| Issue | Rule | Source |
|---|---|---|
| False statement to obtain compensation | Unlawful if knowing and material | Ins. Code 1871.4(a)(1) |
| False statement to deny compensation | Also unlawful | Ins. Code 1871.4(a)(1), (a)(2) |
| Discouraging a worker from claiming | Unlawful if knowingly false | Ins. Code 1871.4(a)(4) |
| Criminal penalty | Jail or prison, fine up to $150,000 or double the fraud | Ins. Code 1871.4(b) |
| Retaliation for filing a claim | Compensation increased by one-half, up to $10,000, plus reinstatement and lost wages | Lab. Code 132a(1) |
The firm’s page on workers’ compensation retaliation defense for California employers describes its work on retaliation and wrongful termination claims.
When you doubt an injury claim
- Preserve the injury report, witness statements, schedules, video, and any messages about the incident, along with the employee’s personnel file.
- Calendar any 132a petition, demand, or lawsuit deadline, and check EPLI notice requirements alongside the comp carrier’s.
- Identify the supervisors and coworkers with firsthand knowledge, and make sure no one confronts, demotes, or reschedules the employee because of the claim.
- Pull the facts behind the suspicion, such as social media posts or outside work, and send them to the insurer’s adjuster in writing.
- Talk to a lawyer before any discipline, termination, or change in duties for an employee with an open claim.
Workers’ comp fraud questions from employers
Should we report suspected fraud to the insurer?
Yes. Give the adjuster the specific facts, not conclusions. The insurer decides whether to investigate or refer the matter. Accurate reporting also protects the company, since a false or exaggerated report made to defeat a claim falls under section 1871.4 as well.
Can we hire our own investigator?
It’s usually better to let the insurer handle surveillance. An employer-run investigation of someone with an open claim can look like retaliation and can raise privacy issues. If the company does gather information, it should stay factual and go to the insurer.
What if the employee is working another job while off work?
Report it to the adjuster with whatever documentation exists. Outside work may or may not be inconsistent with the work restrictions. That’s a medical and claims question, not a basis for discipline by itself.
Can we still enforce attendance and conduct rules?
Yes, evenly. Rules that apply to every employee can apply to one with a claim. The risk is enforcing them more strictly after the claim than before, which is the pattern section 132a claims are built on.
If an employee claims you retaliated over a comp claim
If your company has received a 132a petition, demand, or lawsuit after acting on doubts about an injury claim, the documentation behind the decision and its timing usually decide the defense. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving terminations of employees with open workers’ compensation claims. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Insurance Code section 1871.4 and Labor Code section 132a.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.