What is Workers’ Compensation?
Workers’ compensation is designed to provide income replacement and coverage of medical expenses for employees who are injured on the job. Presently workers’ compensation is a quid pro quo system under which the employee gives up the right to sue the employer for injuries from work-related accidents in exchange for receiving benefits without regard to fault. If the injury is related to the employment, it does not matter who caused the injury; the employee is awarded benefits. At the same time, benefits provided by workers’ compensation are the employee’s exclusive remedy for redress of his or her work-related injury, meaning that the employee is prohibited from seeking tort damages against the employer in civil court.
Workers’ compensation provides disability benefits (wage replacement) to employees who are injured on the job or who become temporarily or permanently disabled due to an on-the-job injury or to illness. This benefit is funded by employers in any one of three ways:
- state insurance funds, which are created and maintained by employer premium payments that are geared in amount to the risk involved;
- employers who act as self-insurers; or
- employers who contract with an approved private insurance company.Workers’ compensation insurance premiums are based on the accident history of a company.
How do workers’ compensation laws work?
Workers’ compensation laws are in effect in every state, the District of Columbia and Puerto Rico. (For more information about specific state workers’ compensation provisions, see State Laws.) The federal government provides similar coverage for civil, interstate railroad and maritime employees (see Federal Laws). Although the various state and federal laws have broad differences, principally in their benefit provisions, most acts have some common features:
- Benefits are provided for accidental injury.
An employee is entitled to statutory benefits from the employer when he or she suffers a personal injury by accident arising out of and in the course of employment.
- Benefits include wage-loss, medical and death benefits.
Benefits include wage-loss benefits (usually one-half to two-thirds of the employee’s average weekly wage), hospital and medical expenses, and death benefits.
- Covered employees are defined by law.
Only employees, as defined by law, are covered; independent contractors are not covered.
- Fault is not generally an issue.
Fault is not an issue. The employee’s contributory negligence does not lessen his or her right to benefits, and the employer’s complete freedom from fault does not lessen its liability.
- Employees give up the right to sue their employer.
In exchange for the assured benefits, the employee and the employee’s dependents give up their right to sue the employer for damages (i.e. lost wages, medical payments, pain and suffering) for any injury covered by a workers’ compensation act.
- Employees retain the right to sue negligent third parties.
The employee maintains the right to sue any third party whose negligence may have caused the injury. The proceeds of any such suit are usually applied first to reimburse the employer for benefits paid to the employee.
- State agency administers the system.
The responsibility for the administration of a workers’ compensation system usually resides in the hands of a commission or board. The rules of legal procedure, evidence and conflict of law are relaxed to best achieve the purposes of the law-providing benefits to employees injured on the job.
- Employers are required to be insured.
The employer is required to insure its liability through private insurance, state insurance funds (in some states) or self-insurance, and the cost of providing coverage is passed on to the consumer in the price of the product.
How can workers’ compensation costs be avoided?
Literally thousands of Americans are killed each year as a result of on-the-job accidents, and many more incur work-related disabilities and contract occupational illnesses.
Besides the incalculable cost of pain and grief, there are very high monetary costs attached to these statistics-lost production, wages paid to sick and disabled workers, wages paid to employees that must substitute for sick and disabled workers, damaged equipment, insurance claims, and administrative and recordkeeping costs.
Both humanitarian desires and economic good sense have encouraged employers to create and maintain safer and healthier working environments. Where employers have not gone far enough, employees, unions and government agencies have applied pressure for greater efforts.
Take a microscopic view of the workplace.
Ensuring a safe and healthy workplace is far more complicated than it first might seem to be. The effort involves the design of the job itself, the environment in which the job is performed, and the skills and attitudes of the employees performing the job. How safe a job can be depends upon the technology available and the state of medical research. It requires the input of engineers, doctors, industrial hygienists and trainers.
Some jobs, of course, are more dangerous than others, requiring special, even extraordinary measures. Coal mining and fire fighting are among the least safe jobs, x-ray technology and cosmetology among the least healthy.
But even jobs which appear to be extremely safe and healthy, like office jobs, deserve attention by companies and employees alike. Poor ventilation, poor lighting, and other environmental factors may have an adverse effect on the health and well-being of office workers.
Workers’ comp litigation can be reduced by keeping safety in mind.
Keep these points in mind to help reduce workers’ compensation litigation.
Develop a safety-first culture.
Show employees that the company cares about preventing accidents. Involve employees in designing safety training programs and in creating safety programs. Make people accountable.
Develop a workers’ compensation team.
That includes the risk manager, the human resources staff, the benefits administrator, employee counselors, and frontline supervisors.
Set up a special task force to address safety and workers’ compensation issues.
Include equal representation from non-management employees, use a co-chairmanship arrangement, and have senior executives in attendance. Task force agenda should include conducting safety inspections, reviewing and developing a system for reporting safety problems, reviewing loss experience and claims, reviewing first report of injuries, and providing feedback to each department about safety awareness.
Review your workers’ compensation treatment program.
In that review, utilize case management, render high quality care, and discourage an adversarial atmosphere.
Don’t cut safety programs.
In the long run, it is not wise to make safety programs a casualty of cost-reduction efforts.
Reexamine company and management attitudes toward injured employees.
Avoid the perception of being insensitive and unconcerned. Don’t blame employees for their injuries. Be supportive. Consider full pay for short periods to develop good will.