Workers' Compensation Glossary

All businesses must carry workers' compensation insurance. Even small businesses must have workers' comp insurance for their employees. Ordinary business insurance does not cover an employee's injuries. Employers may not ask employees to pay their medical expenses with private insurance. Workers' compensation coverage pays for all work-related injuries.

Important Workers' Comp Terms to Know

Medical bills are expensive these days. Employers are responsible for workplace safety and ensuring workers can return to work after an injury or illness. Workers' comp coverage is the best way to make this possible.

Before you call an insurance agent looking for a quote, review the list below so you understand some of the terminology. The cost of a workers' compensation policy depends on your industry and the number of employees. Get a feel for what you want before talking to an adjuster.

Accepted claim: Also called admitted claim. A claim the insurance company accepts as covered by workers' compensation insurance.

Agreed medical evaluator (AME): The doctor that the patient's attorney and the insurance company agree on to conduct the evaluation.

Alternative work: If a worker cannot return to the same job, workers' compensation laws encourage employers to offer them alternative work. The alternative position must meet work restrictions defined by the doctor, last at least 12 months, and pay at least 85% of wages and benefits. The job must be within "reasonable commuting distance" of the employee's home.

Americans with Disabilities Act (ADA): The ADA prohibits discrimination against people with disabilities, including those caused by workplace injuries. Employers must accommodate workers with disabilities.

AOE/COE (Arising out of and occurring in the course of employment): This notation may appear on workers' compensation paperwork. It means the worker's injury is due to their job or work environment.

Average daily wage (ADW): The ADW calculates an injured employee's average daily earnings. It is one way to calculate wage loss benefits.

Average weekly wage (AWW): The AWW is another method of calculating wage loss benefits. The method depends on whether the pay period is weekly, biweekly, or monthly.

Carve-out: Carve-out programs let employers and unions create their own workers' compensation systems through a contract or collective bargaining agreement.

Cumulative injury (CT): Injury or illness caused by repeated events or exposures. Carpal tunnel syndrome caused by repetitive wrist movements is a cumulative injury.

Death benefits: Benefits paid to the spouse and dependents of an employee killed on the job.

Denied claim: A claim rejected by the insurance carrier. Either the carrier believes the injury did not happen on the job, or it was not as severe as the worker claimed.

Disability: A physical or mental impairment that severely limits one or more life activities. In a work context, disabilities can be temporary or permanent.

Employer's liability insurance: An indemnification included in the workers' comp policy that protects the business if the employee sues the employer for failing to prevent a workplace injury. Not all states provide this coverage.

Ergonomics: The science of how the human body interacts with the workplace. Ergonomics helps design and modify tools, furniture, and job descriptions to fit human capabilities better.

Essential functions: Duties critical to a job. The AMA requires employers to list essential functions when creating a job description.

Family and Medical Leave Act: A federal law that requires covered employers to give eligible employees up to 12 unpaid weeks of leave per year to care for family members with serious illnesses or to recover from their illness or injury.

Future earning capacity (FEC): A figure used to calculate the wage loss award based on how much a worker might have been able to earn had they not suffered the injury or disability.

Impairment rating: A percentage of loss of use based on American Medical Association (AMA) guidelines. An impairment rating is part of the permanent disability rating.

Independent contractor: One who is not an employee. Independent contractors may be consultants or freelancers. They usually have their own health insurance or general liability insurance.

Independent medical examination (IME): A worker's own physician may see them after the initial injury. If there is any dispute about the nature of the injury, one or both sides may request an independent examination.

Maximal medical improvement (MMI): The point where the employee's condition has stabilized and is unlikely to improve. At this point, the worker can return to work unless permanently disabled.

Medical-legal report: A doctor's report. Workers' comp cases may need specific forms or a particular format. Medical-legal reports help clarify why workers cannot perform certain work functions.

Modified work: Changes to the original job that lets the employee continue working. If the doctor says the worker cannot return to work, workers' compensation encourages employers to modify the job description or provide alternate work. For instance, if the worker can do the job sitting but not standing, allow them to sit down during work hours.

Objective factors: The doctor's observations that define a work disability.

Permanent disability (PD): A lasting disability that reduces earning capacity. In a work context, a permanent disability may not result in a complete inability to work. Permanent disability benefits are payments for when a work injury results in a limit to the type of work you can do to earn a living.

Permanent partial disability (PPD): A partial disability affects one body part or does not entirely prevent someone from working. For instance, someone who cannot stand eight hours a day can still work at a desk job.

Permanent total disability (PTD): A disability that prevents the individual from working or earning a living. Most permanent total disabilities affect a person's daily life activities as well as their ability to work.

Physical therapy (PT): A method of recovery from physical injuries. Usually performed between surgery or recovery from a serious injury and return to work.

Pre-designation: In some states, employees have the right to choose their private physician as their primary treating physician (PTP) in case of a workplace injury. If a worker wants their private physician, they must notify their employer before any injury or illness.

Regular work: The employee's original job. If the employee is returning to work, "regular work" is any job substantially similar in function and pay to their actual position.

Social Security Disability Benefits (SSDI): Benefits paid to disabled people through the U.S. Social Security Administration. Some state workers' comp laws may not allow workers to simultaneously collect benefits from SSDI and workers' comp.

Specific injury: An injury or illness caused by a single event. A neck injury caused by a fall from a scaffolding is a specific injury.

Statewide average weekly wage (SAWW): A calculation of average wages in a jurisdiction for a certain period. Adjusters calculate minimum and maximum workers' comp benefits based on the SAWW.

Subjective factors: Pain and other symptoms a worker describes to a doctor. Subjective factors are part of a disability rating but count less than objective factors.

Temporary partial disability (TPD): Happens when an injured worker can still work despite the injury. TPD benefits exist if the worker can only work part-time or at a different job but will fully recover. The benefits pay partial wages until the employee returns to full-time work.

Temporary total disability (TTD): This means the worker will fully recover but cannot work. An example might be a fractured femur requiring six weeks of immobility. TTD benefits stop when the employee returns to part-time or full-time work.

Vocational rehabilitation: Vocational rehabilitation is a program offered to workers needing help returning to work or finding employment after an injury. VR or "voc-rehab" may include placement services, retraining classes, resume writing courses, and other help.

Work restrictions: An employee on partial disability or modified work will get their doctor's list of work restrictions. These say what the worker can and can't do. The purpose of work restrictions is to allow the person to continue working while limiting the chance of more injury.

Workers' compensation insurance policy: The insurance policy that protects workers in the event of a workplace injury. Employers provide full coverage, guaranteed return to work, and disability payments if needed. Employees agree not to sue in exchange for health care and medical treatment following the injury.

Get Help from an Attorney

Small business owners may never need to file a workers' compensation claim. If you have a small office, years could pass before anyone needs medical care. But you still need to follow state laws. Small business insurance is available for companies who need coverage but don't need the comprehensive policies carried by major corporations.

If you have questions about your workers' comp obligations, consider enlisting the help of an attorney in your area.