Workers' compensation is insurance paid by companies to provide benefits to employees who become ill or injured on the job. Through this program, workers are provided with benefits and medical care, and employers have the assurance that they will not be sued by the employee (in most cases).
Fact 1: Worker's compensation programs are administered by states.
Employers pay into state workers' compensation funds or self-insurance. Then benefits are paid to workers who become ill or injured while on the job.
The federal government administers separate worker's compensation programs for specific groups, including federal employees, longshore workers, and coal miners.
Employees do not contribute to workers' compensation premiums.
Each state has a workers' compensation program, but each has distinct and different regulations. Check with your state's department of labor or similar agency for details.
Fact 2: Workers' compensation is required for all employers.
That statement is essentially true, but the level and type of coverage are different for each state and one state doesn't require this coverage. Coverage is required for employees as defined by the state, and "all persons appointed or hired by private employers for remuneration," including independent contractors. Some non-employees can get an exemption from workers' compensation coverage (see below).
States differ in:
- Who are covered employees
- Types of injuries covered and proof
- Excluded injuries
- Statutes of limitations (the length of time an employee has to file a claim)
- Employer defenses against claims, including self-inflicted injuries, willful misconduct, and injuries with drugs/alcohol.
Texas is the only state that does not require employers to have workers' compensation coverage. But they warn that "going bare" may leave the employer open to personal injury lawsuits by employees.
Fact 3: Most states allow employers to self-insure workers' compensation coverage.
Each state that allows employers to self-insure for workers' compensation has specific requirements to qualify for self-insurance. Colorado, for example, allows self-funding for individual businesses, or through groups or pools.
Four states – Ohio, Wyoming, Washington, and North Dakota – don't allow businesses to buy private insurance. These states are called "monopolistic" because they require employers to buy workers' compensation insurance only through their own insurance fund.
Some states allow certain individuals, such as independent contractors, to be exempt from workers' compensation laws. Florida, for example, allows officers of a corporation or members (owners) of an LLC to file an application to exclude themselves from the state's workers' compensation laws. Arizona carefully states that the exemption is only for sole proprietors who work for an employer who has workers' compensation insurance.
Fact 4: Worker's compensation covers long-term illnesses and injuries as well as incidents.
Workers' compensation benefit payments help workers by replacing their wages, paying for medical treatments, and providing vocational rehabilitation programs so they can go back to work. These types of benefits paid are for work-related/on-the-job injuries and accidents:
- Medical coverage, including drug coverage
- Disability benefits to replace part of the employee's pay while disabled
- Rehabilitation, including psychological counseling
- Death benefits for the worker's spouse and dependents.
Some workplace injuries can occur over time or on a long-term basis; repetitive stress injuries like carpal tunnel, for example. Illnesses caused by exposure to a workplace environment, like black lung, are also considered work-related and may be covered by worker's compensation.
Fact 5: Workers' compensation premiums are based on state rates and an individual employer's past experience.
Workers' compensation rates vary by state and by employer classification. Every two years a Premium Rate Ranking Survey issues a report that compares workers' compensation premiums by state and employer classification. The latest survey report was in 2018.
The cost of workers' compensation benefits to the individual employer is based on the gross payroll and the number and severity of illnesses and injuries that type of employer experiences. For example, a trucking company would have a higher ranking than a clerical office.
Fact 6: Employees may be able to sue an employer for workplace injuries.
Although worker's compensation payments usually don't allow employee lawsuits against employers, there are some circumstances in which an employee can still sue an employer for an on-the-job injury or illness for various reasons, including:
- If the injury was intentional on the part of the employer, or
- If the injury was outside the scope of the worker's job assignment.
Fact 7: Some workplace injuries are outside the scope of worker's compensation.
On the other hand, some workplace injuries are outside the scope of worker's compensation, and the injury or illness is not compensated by worker's compensation:
- If the injury was self-inflicted,
- If the injury happened during the commission of a crime,
- If the employee violated company policy, or
- If the employee was not on the job when the event happened.
Payment for pain and suffering and negligence claims are not included in workers' compensation.
Fact 8: Employees may not be discriminated against for filing a worker's compensation claim.
Under both federal and state whistleblower laws, employers are prohibited from firing, retaliating against, or otherwise discriminating against employees who file worker's compensation claims.
Fact 9: Workers' compensation fraud can result in high fines and penalties.
Workers' compensation fraud by employers is usually undertaken to reduce premiums. Common examples of workers' compensation fraud by businesses include:
- Mis-classifying employees as non-employees or owners and
- Under-reporting the number of employees
Worker's compensation fraud by employees includes:
- Falsely claiming an injury
- "Double-dipping" by collecting workers' compensation and Social Security disability benefits at the same time.
Employees may also commit workers' compensation fraud by falsely claiming an injury. And sometimes providers contribute to the fraud by claiming fees for non-existent medical treatments or services.
Fact 10: Employers Must Keep Records, File Reports, and Give Information to Employees.
Each state has specific requirements for reporting workers' compensation information to employees and to the state agency. In general, employers must:
- Display a notice to employees at specific places
- Keep a record of lost time injuries and occupational disease
- Report lost-time injuries and other accident reports.