Workers' Compensation FAQ

Small business owners are often surprised when they learn that many of the same rules that apply to big corporations also apply to them. Workers' compensation insurance is one of those things that small businesses may not think they need but must have by law.

Most state laws require all businesses to have workers' comp insurance regardless of the number of employees. In a few states, even sole proprietors must carry some coverage.

It might seem absurd that a two-person office would need workers' compensation coverage, but it makes good financial sense. Read on for the answers to these frequently asked questions about who needs workers' comp and how it protects all businesses.

What is workers' compensation insurance?

Workers' compensation insurance is a type of insurance policy that covers work-related injuries. Workers' comp is a type of no-fault coverage. If the injury happens on the job or due to the employee's interaction with the work environment, the insurance carrier pays 100% of the costs of medical treatment.

Workers' compensation coverage includes:

• Physical therapy
• Unemployment payments
• Long-term disability benefits, if the injury is severe

In return, the employee waives the right to sue the employer for their injuries, even if the employer was partially at fault. This helps ensure the employee gets timely medical care rather than taking their employer to court for every personal injury case.

What is group self-insurance?

Small businesses with few employees sometimes form an insurance group similar to a large corporation's self-insurance. The group must be able to cover all costs associated with a single employee's injury.

Small business group self-insurance is effective for small companies of similar sizes and industries. For instance, several small offices may form one group and cover their own employees rather than each office having to purchase workers' compensation itself.

Each state has different requirements for group self-insurance. Business owners should review this option with their insurance agent when making workers' compensation decisions.

Who does workers' compensation cover?

A standard workers' comp policy covers all employees while acting in the scope and course of employment. That means that workers' comp covers:

• Full-time employees
• Part-time employees
• Temporary workers
• In some cases, independent contractors if they are fulfilling a specific role on property or while in the course of employment
• Volunteers in some situations, such as volunteer firefighters while on duty

Vendors, delivery drivers, and other business visitors generally are not your employees and are not covered by your workers' compensation. A UPS driver injured while delivering a package to you files a claim with their company's workers' comp insurance company, not yours.

Am I required to have workers' compensation insurance?

Yes. Every state except Texas requires businesses to have either private insurance or state insurance. A few large corporations are self-insured employers. Most small businesses have workers' compensation insurance through state exchanges.

Your annual payroll helps determine your workers' compensation insurance premiums. Companies with smaller payrolls will have smaller insurance costs. Your state division of workers' compensation can assist you with finding a plan that fits your small business needs.

Are all workplace injuries covered by workers' compensation?

Not all injured workers can file workers' compensation claims. An injury or illness must be "work-related." That is, they must directly flow from the type of work the employee does or the workplace environment itself.

In general, workers' comp covers:

• Injuries on the job
• Illnesses due to the job conditions
• Injuries and illnesses reasonably related to the job conditions or made worse because of the job

Workers' comp does not cover the following:

• Injuries caused by a third party at the work site
• Injuries caused by the employee's carelessness or deliberate acts
• Injuries or illnesses unrelated to the job

For instance, falling from scaffolding is a likely cause of injury at a construction site. Being hit by a delivery truck at the construction site is not. In the latter case, the injured employee would have to file a personal injury claim against the driver's employer for their medical expenses.

Are illnesses covered by workers' comp?

Your workers' compensation insurance policy covers some illnesses, known as occupational illnesses. According to the U.S. Department of Labor (DOL), an occupational disease is any illness caused by an event or exposure in the work environment.

Some of the most common occupational diseases are:

• Respiratory diseases such as COPD, silicosis, asbestosis, and bronchitis
• Poisoning through chronic exposure to toxins such as arsenic, lead, mercury, pesticides, and carbon monoxide
• Biological contamination resulting in long-term illnesses like cancer, AIDS, tuberculosis or Hepatitis-C

Many workplace illnesses appear long after exposure to the toxin or chemical. Causation can be difficult to prove. Employers should follow up on all reports of injury and illness and encourage workers to follow safety procedures. The statute of limitations is based on when the injury or illness could have reasonably been discovered.

Are independent contractors covered by workers' compensation?

Sometimes. Workers' compensation covers independent contractors and subcontractors if they are working at your business or trade.

Misclassifying workers as independent contractors is a serious offense. Employers sometimes do this to avoid paying additional workers' comp premiums.

I offer private health insurance for my workers. Do I still have to have workers' comp?

Yes. Employers must have workers' compensation insurance coverage for all employees in case of workplace injuries. Employees cannot use their health insurance to pay medical bills, and most healthcare facilities will not accept private insurance if they learn the injury is work-related.

An employee may request an exemption from workers' compensation if they prefer to use their own insurance, but you may not suggest that as an option.

What are work restrictions? Do I have to use them?

Part of workers' compensation benefits include a return-to-work policy. Employers should work with their employees and doctors to develop a back-to-work plan whenever an employee is sidelined by illness or injury. This includes accommodating the doctor's work restrictions.

Work restrictions describe what the employee can and cannot do while recovering. For instance, an employee may need a desk job for a few weeks, or their workstation may need reconfiguring to avoid the type of incident that caused the injury.

The employee was responsible for the accident. Am I allowed to fire them?

Employers cannot terminate employees because they filed a workers' compensation claim. If your own investigation has determined that the worker was responsible for causing the accident and your employment policy allows you to fire a worker under those conditions, you may take appropriate action.

In general, firing someone while they are out on workers' compensation is a tricky matter. If you're facing this issue, consider consulting with an employment law attorney before moving forward.

Getting Help With Workers' Compensation Claims

If you need legal advice about workers' compensation claims or handling an employee injury, contact an experienced business and commercial law attorney.