We saw a recent article in the national press indicating the California State Compensation Insurance Fund (SCIF) will seek $50 million from Select Staffing Co. Inc. following a jury finding this employer guilty of fraud. The jury's finding earlier this month stems from a lawsuit brought by SCIF alleging the Santa Barbara, Calif.-based temporary staffing company avoided paying tens of millions of dollars in premiums by “piggybacking” on a workers compensation policy purchased by a now-defunct professional employment organization.
In this case, “piggybacking” refers to Select Staffing allegedly gaining a lower experience modification by making its workers employees of a defunct PEO named Onvoi Business Solutions Inc., sources said. Insurers use experience modifications to calculate a policyholder's losses and premiums. The lower the experience-modification, the lower the premiums; and sources said Onvoi had an experience-modification of about 70 while Select Staffing's was closer to 300. SCIF also alleged Select Staffing underreported its payroll.
California law allowed San Francisco-based SCIF to choose among various options to calculate damages. On Thursday, a spokeswoman for the state insurer said it chose an option that results in the $50 million it is seeking from Select Staffing.
Select Staffing said that it strongly disagrees with the finding against it and will appeal. Select also said the dispute with California State Fund stemmed from a business relationship it entered with Onvoi 10 years ago and SCIF's employees were aware of the arrangement. Select Staffing management asserted they paid a fair price for the insurance. Obviously, the jury disagreed.
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