The state of Minnesota has charged a Princeton, Minn., construction firm with workers compensation fraud after the firm claimed it had no employees for two years.

The criminal complaint stemmed from a worker's assertion that he injured his eye with a nail on a jobsite but was denied workers' compensation medical coverage.

Minnesota's Commerce Fraud Bureau investigated and the Hennepin County Attorney's Office subsequently filed a criminal complaint on Monday. It charged Nelson Israel Lopez Giron — the owner of wood-framing firm Giron Construction — with workers' compensation fraud. Giron could not be reached for comment.

According to the complaint, Giron told his insurer the injured man was not his employee. A state investigation found otherwise and concluded more than a dozen workers on the jobsite the day of the injury were directly employed by Giron's company. Bank and insurance records showed payroll of $120,000 to $2 million around the time the incident occurred, the complaint said.

Giron Construction should have paid more than $20,500 a year in workers' compensation premiums instead of the $671 minimum Giron paid to secure a bare bones insurance policy, the complaint said.

"Evidence indicates that the defendant intentionally misled [his insurance company] with respect to Giron Construction's payroll," according to the criminal complaint filed in Hennepin County District Court.

The worker, who was referred to anonymously in the complaint, was hammering a nail into wood at a Giron Construction jobsite in February 2020 when the nail bounced back and struck him in the eye. Giron offered only eye drops for first aid on the jobsite. When the worker said he needed medical help, Giron told the worker to lie to hospital staff about where the injury occurred, the complaint said.

When the worker filed a workers' compensation claim, the insurer denied benefits because Giron said he did not know the worker. Giron, according to the complaint, had been paying the man and several other workers in cash under the table and underreported his payroll to save on tax and insurance costs, the state said.

The injured worker declined to be interviewed.

The worker was unable to work for more than a year, was forced to change to a lower paying industry and continues to struggle with nerve pain, said Merle Payne, co-director of Centro De Trabajadores Unidos En La Lucha (CTUL).

CTUL and local churches raised money to support the man and his family while he recovered.

"This has been a hardship," Payne said. "He spent a long time without work and now is making much less than before. It's had a significant impact on his family."

Minnesota state legislators, the Attorney General's Office and officials with the Department of Commerce said wage theft, paying workers off the books and misclassifying employees as independent contractors are big problems on construction sites across Minnesota.

The Giron case "exemplifies the need for legislation to create a legal structure in the construction industry that directly addresses wage theft, which commonly involves workers' compensation fraud," said state Rep. Sandra Feist, DFL-New Brighton, who sponsored two bills calling for tougher penalties against offending companies.

"My bill will dis-incentivize contracting with subcontractors who engage in wage theft like this, where employers pay employees off the books without proper protections," Feist said.

The practice robs workers not only of pay, but also benefits such as workers' compensation insurance and unemployment benefits. It also results in underpaid taxes. About $136 million is lost annually in Minnesota just in the construction industry, according to the Midwest Economic Policy Institute.

Minnesota Attorney General Keith Ellison said misclassification of employees as independent contractors is "rampant" in the construction industry and the gig economy.

The Minnesota Commerce Fraud Bureau, which investigated the Giron allegations, said workers' compensation fraud is its fourth largest category of crime — following auto, homeowners and health insurance fraud.

The bureau investigated 122 workers' comp fraud cases in 2021, the last year for which data is available. The state had 131 cases in 2020 and 150 in 2019.

Employment attorney Brendan Cummins expects more criminal cases in the future now that the COVID-19 pandemic is under control, there's a new and tougher wage theft law in Minnesota and there are more efforts by labor and community groups to educate workers about their right to workers compensation insurance coverage.

"It's a widespread issue and is severe enough that the only way to really provide for accountability is through the criminal laws because the civil laws are not strong enough to deal with it," Cummins said. "So we are seeing prosecutions. And I expect to see more of these types of cases."