What is Workers Compensation?

Workers’ Compensation is a form of insurance providing wage reimbursement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence.

The trade-off between guaranteed, limited coverage and lack of recourse outside the worker compensation system is known as “the compensation bargain”.  This system was devised so employees had the guarantee protection to be paid in the event of an injury but employers weren’t in a situation afraid to hire or grow their business due to suit by their employees.  This system was also designed to free up the courts and legal system.

Workers Compensation differs among states, provision can be made for weekly payments in place of wages, compensation for economic loss (past and future), reimbursement or payment of medical and like expenses, and benefits payable to the dependents of workers killed during employment.  The recent introduction of the Affordable Care Act will have impacts on the Workers Compensation system (We will address this topic under another discussion).  General damages, pain and suffering, and punitive damages for employer negligence, are generally not covered in workers’ compensation plans, and negligence is generally not an issue in the case.

In most states (there are a few exceptions), as an employer you must provide workers compensation insurance to your employees.  An example of an exception is Texas.  Texas employers have the ability to opt out of the workers’ compensation system under the original state law written in 1913. However, those employers, known as non-subscribers, are exposed to legal liability in the event of employee injury.

The workers’ compensation system is administered on a state-by-state basis, with a state governing board overseeing varying public/private combinations of workers’ compensation systems. The federal government has its own workers’ compensation program, subject to its own requirements and statutory parameters for federal employees.

It is illegal in most states for an employer to terminate or refuse to hire an employee for having reported a workplace injury or filed a workers’ compensation claim. However, it is often not easy to prove discrimination on the basis of the employee’s claims history.

We will cover many topics on workers compensation as we continue, but please Contact Us if you have a specific question that you need addressed.

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Arnold Smith

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