Workers' Compensation Overview

Small business owners must have workers' compensation insurance like larger business owners. In every state except Texas, businesses with even one employee must have workers' compensation insurance coverage.

Workers' compensation is the system of laws granting health benefits to injured employees. Each state has its workers' compensation laws, but generally, all laws follow the same policy.

Employers have specific duties to their workers under the workers' comp system. Employers must provide medical care, keep records of employee injuries, and send workers' compensation claims to the state labor board as required.

A workers' compensation insurance policy ensures employees get treatment for work-related injuries. They can get treatment with or without private medical insurance.

The Purpose of Workers' Compensation Laws

Workers' compensation laws take the place of litigation. Injured workers get medical care without bringing their cases to court. Workers' comp benefits pay out if the injury happened on or because of the job.

Workers' compensation laws also protect employers and co-workers. They limit the amount employees can recover from medical expenses and partial wages. In most cases, employees can't sue their co-workers for their injuries.

Workers' compensation is a no-fault system where the worker's or employer's negligence is not at issue. The employee gets full compensation for their injuries without litigation.

Workers' compensation is an injured worker's exclusive remedy. They do not file a workers' comp claim if they can show third-party involvement. They can sue the third party directly for damages.

How Workers' Compensation Works

In a typical personal injury or civil lawsuit, the injured party must file a claim against the defendant alleging negligence. Both sides can show evidence and allege the other side is partially at fault in the accident. Civil lawsuits can take months or years to resolve.

Workers' compensation insurance covers 100% of an injured worker's medical treatment. There is no need to file a court case or show evidence for or against the employer or employee. The question of negligence on either side is not at issue. The employee waives all rights to file suit against the employer in exchange for full medical coverage while recovering.

Workers' comp is an adjunct to state and federal disability benefits. In some states, employees may apply for short-term disability payments while receiving workers' comp. In other states, workers' comp costs include partial wages if the employee cannot work.

Injuries Covered by Workers' Compensation

State laws determine exactly what workplace injuries workers' comp insurance covers. In general, workers' comp will cover all workplace injuries and illnesses, including:

• Injuries that happen during work hours, even if employees notice or treat the injuries after work hours.
• Illnesses caused by exposure to chemicals or toxins at work due to normal working conditions.
• Preexisting conditions aggravated by normal working conditions. The employer must be aware of these conditions and the need to accommodate them.
• Injuries during breaks, lunch hours, work-sponsored activities, and company property.
• Mental and emotional illness due to stress or harassment if the employer was aware and did not address the issue.
• Death benefits for family members of employees killed in on-the-job accidents.

For instance, an employee with an existing back condition that is re-injured on the job may get workers' comp coverage if the employee made the employer aware that they had such a condition and an injury was possible. The employee must avoid re-injury if they know certain activities could cause injury.

Injuries Not Covered by Workers' Comp

An employer's workers' compensation policy does not cover some job-related injuries. Some employees may not be covered depending on where and how they work for you.

Workers' comp protects workers injured on the job and who should not have to sue their boss to get medical benefits. State and federal laws do not want employers to pay for employees' malicious or intentional infliction of injury.

Workers' compensation may not cover the cost of workers' injuries when:

• The injury was due to horseplay or intentional misuse of company property. Insurance might cover the careless handling of a pallet jack but not pallet jack races in the warehouse.
• The employee was intoxicated or impaired when they got injured. Just as your personal liability insurance will not pay for your traffic accident if you were drinking, workers' comp will not cover a workplace accident caused by an intoxicated worker.
• The employee was traveling to or from work. Most states do not consider travel time as being "on the job." If an employee must drive a marked company vehicle or clocks in remotely, workers' comp may cover them. Check with your state's workers' compensation laws.

Workers' comp covers seasonal and part-time employees, although states may have requirements about how many hours they must work to get benefits. In general, workers' compensation doesn't cover independent contractors.

But, if your agreement with the contractor requires them to come to your workplace while they work, you may want to include a clause stating the contractor handles their own health insurance.

Some states exclude some categories of workers, such as in-home workers or agricultural workers. These groups may have a separate type of insurance in case of workplace injury. Sole proprietors or the self-employed may not need workers' compensation insurance.

Employer Duties Under Workers' Compensation Laws

A workers' compensation claim begins when an injured employee notifies the employer or manager. Unless the worker is so seriously injured that they need emergency transportation, they may not seek medical care until they tell their boss about the injury. The employer must send a "first report of injury" to the state workers' comp office to begin the insurance process.

The employer has extra responsibilities once an employee files a claim. The requirements vary in each state, but include:

Reporting obligations. Employers must make written reports of all injuries that need more than minor first aid. They must give documentation of these injuries to their insurance company and the state workers' compensation office as necessary. They must provide any documents requested by the medical provider or the employee's attorney.

Return-to-work programs. A workers' comp policy only covers medical costs. The goal is to return the employee to work as soon as possible. Employers and employees must work with the employee's doctor to develop a back-to-work plan once the doctor releases the employee from medical care. If workers can't return to their original position, they must return to a position equal in pay and responsibilities. The employer must take the initiative in these situations.

Dispute resolution. Most insurance policies contain a dispute resolution or arbitration clause. States may have a "carve-out" for alternative dispute resolution (ADR) between the employer, employee, and the insurance carrier. This expedites settlements in workers' comp disputes.

Hire an Attorney for Workers' Compensation Coverage Issues

Small business owners should contact a business and commercial law attorney in their state before getting their workers' compensation insurance quotes. Be sure your insurance covers all your workers and conforms with state law.