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So, you are saying that committing fraud is OK?
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Well hell yeah!
Of course not. If the company wants to lay them off because it's Tuesday and the manager hasn't been laid in a month.....so be it. That is their right as far as I am concerned. Do I think it is right, no, but that is just my opinion.
If the employees lied on their resume, application for employment, or whatever that involves their employment that is one thing. If they lied on an insurance application that only effects them, then I think the company is going a bit far is all.