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Workers’ compensation (WC) insurance provides financial support and medical and disability coverage to employees injured in the course of employment in return for those injured workers relinquishing the right to sue their employers.
Although workers can only seek workers’ compensation for work-related injuries and illnesses from their employers, they can still sue the manufacturers of products or equipment which caused the injury.
All WC laws follow the same basic premise, but there is a lot of variety in the details. Benefits always include medical coverage and varying amounts for loss of income benefits.
Scope
Most employers are required by law to provide for the payment of workers’ compensation claims, at no expense to their employees. Most private employers are covered by state regulations. Employers with as few as one employee are typically covered, with certain exemptions for sole proprietors, agricultural employers, and so on. The exemptions vary by state.
Regulatory citations
Regulated by each individual state’s statutes. Several federal acts provide government workers with WC coverage, subject to its own requirements and statutory parameters for federal employees.
Key definitions
- Classifications: Used to group employers into industries and jobs into occupations with premiums that match their level of hazards.
- Exclusive remedy: Workers’ Compensation (WC) is an exclusive remedy, where no other benefits are required by law for work-related injuries and illnesses. Workers can only seek statutory compensation for injuries from their employers, although they can sue product manufacturers for liability, or their employers for bad faith in mishandling their WC claim.
- Experience rating modification (mod rate): Represents the unique claims experience of an individual employer relative to the average of all employers within the same industry classification—actual claims versus expected claims. Fewer and less expensive claims than an employer’s industry average results in a lower mod rate, which results in a lower premium.
- No fault: A guarantee of indemnification for loss of wages and costs of medical care in return for restrictions in the right to seek recovery through civil courts.
- Permanent partial disability (PPD): Permanent loss of, or loss of use of, one or more body parts or functions from a compensable, work-related injury or occupational disease.
- Permanent total disability (PTD): A complete and permanent disability that causes an employee to be incapable of engaging in any type of substantial and gainful employment.
- Scheduled injuries: A list established by the state showing the number of weeks of permanent partial disability benefits paid for each listed injury.
- Temporary total disability (TTD): Temporary, but total incapacity due to a compensable, work-related injury. An employee is unable to engage in any type of substantial and gainful employment for a period of time.
- Temporary partial disability (TPD): Temporary, but only partial, incapacity due to a compensable, work-related injury. The worker may return to employment but at a different job.
Summary of requirements
Most employers are required by law to provide for the payment of workers’ compensation claims, at no expense to their employees. Most private employers are covered by state regulations. Employers may obtain WC protection through commercial insurance, individual or group self-insurance, state pools, or direct state funding depending on the regulations in their state.
Employers may obtain WC protection through commercial insurance, individual or group self-insurance, state pools, or direct state funding depending on the regulations in their state.
Workers’ Compensation is based on a balance between the needs of both employers and employees. It is meant to be a no-fault, non-adversarial system. Labor gives up the right to sue and management gives up the right to defend against claims.
Employees are covered by workers’ compensation whether or not they were following company policy at the time they were injured on the job. At the same time, even if an injury or illness is due to employer negligence the employer cannot be sued. Some states do reduce compensation if an employee is on drugs or alcohol at the time of an accident.