You didn’t start your business to get caught up in fraud, but if your staffing agency is playing dirty with payroll, your business could face the consequences. One of the most dangerous and overlooked risks today is payroll fraud in staffing—and it’s causing major legal headaches for business owners who thought they were doing everything right.

And in places like Los Angeles County, investigators are cracking down hard. The era of looking the other way is over.

What Is Payroll Fraud in Staffing?

Payroll fraud in staffing includes everything from underreporting wages to misclassifying workers and even creating ghost employees—fake workers whose paychecks are rerouted through direct deposit fraud into a hidden bank account. These fraud schemes are more common than you think, and many business owners are unknowingly tied to them through shady staffing partners.

Staffing agencies may also fail to follow proper employee verification procedures, using stolen Social Security numbers or mislabeling independent contractors to avoid taxes and workers' compensation premiums. The result? False claims, unpaid unemployment insurance, and violations of labor laws that leave you holding the bag.

What Happens If Your Staffing Agency Lies on Payroll?

Here’s the worst-case scenario: your agency fakes a Certificate of Insurance, underreports hours, or commits worker misclassification—and then someone gets injured on the job. Suddenly, you’re facing:

• Insurance audit penalties

• Possible legal action from the Department of Labor

• Full financial liability for medical bills, lost wages, and legal fees

• Investigations into your payroll system and employee records

The staffing agency might disappear, but the responsibility doesn’t. It sticks to you—especially if you didn’t perform due diligence.

And let’s not forget the rise in buddy punching, timesheet fraud, and payroll diversion—all of which can be hidden in a poorly monitored payroll process. These tactics also leave behind red flags like mismatched audit trails, duplicate names, or multiple deposits to the same bank account.

How CheckMyCert Helps You Detect Fraud

You don’t need to be a forensic accountant to spot shady behavior. At CheckMyCert.org, our team specializes in fraudulent COI detection. Just upload the Certificate of Insurance your staffing agency gave you, and we’ll check its authenticity for free.

It’s confidential. No calls. No spam. Just straight answers from insurance and compliance professionals who know how ghost employee scams and false insurance claims work.

Many small businesses assume the COIs they receive are valid. But in today’s world of phishing emails, identity theft, and expense reimbursement fraud, you can’t afford blind trust. Even big firms like Thomson Reuters have published reports showing how asset misappropriation and commission fraud cost businesses billions.

What Los Angeles County is Teaching the Rest of the State

Thanks to recent payroll audit crackdowns in Los Angeles County, enforcement agencies are now coordinating more closely with auditors, legal teams, and investigators. They’re uncovering fake workers, shell companies (like “Company A” fronts), and fraudulent COIs at record speed.

If you’re not reviewing your staffing agency’s practices, you're putting your business at risk. Even simple failures—like lack of multi-factor authentication or segregation of duties in your payroll team—can expose you to fraud without you realizing it.

Smart Moves to Avoid Legal Trouble

Here’s what you can do starting today:

✅ Use a trusted payroll system with fraud monitoring and AI tools
✅ Cross-check employee performance reviews, job titles, and hours worked
✅ Reassess your internal controls for payroll access
✅ Separate who enters and who approves payroll in your system (segregation of duties)
✅ Train your team to recognize phishing emails and payroll red flags
✅ Require secure multi-factor authentication for payroll access
✅ Verify every staffing agency COI through CheckMyCert.org

Ready to Protect Your Business? What happens if your staffing agency lies on payroll? You face legal liability, tax problems, and potential fraud investigations—some that could destroy your business. Don't wait for a lawsuit. Take control now. Verify Your Staffing Partner’s COI Now!

Use CheckMyCert.org for fast, free, and confidential COI verification
Stop fraud before it starts—from ghost employees to worker misclassification
Avoid audits, fines, and lawsuits with a single upload

You built your business on trust and hard work. Don’t let someone else’s fraud burn it down.