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Workers’ compensation insurance will benefit you

By: Roy Banerjee Email By: Roy Banerjee
July 2010
Workers’ compensation insurance will benefit you

Workers’ compensation laws are set up in each state to provide monetary compensation to employees injured on the job in exchange for mandatory relinquishment of the employee's right to sue his or her employer for negligence. Workers compensation insurance is a specialized type of insurance that protects employers. W orkers’ compensation insurance is not included in general business coverage and needs to be obtained separately. While there are some differences among state workers’ compensation laws, generally if you operate a business and have employees, regardless of full- or part-time status, you must provide workers’ compensation insurance to all your employees. Some states require business owners to obtain w orkers’ compensation insurance as soon as they hire their first employee. Because workers’ compensation insurance is mandated by law, small business owners often think that it is just one more overhead expense that provides little benefit. However, in the long run, it can actually save you money and protect both you and your employees.

Workers’ compensation laws are designed to ensure that employees who are injured or disabled on the job are compensated. The monetary awards can include medical expenses, death benefits, lost wages, and vocational rehabilitation. Some laws also protect employers and co-workers by limiting the amount an injured employee can recover from an employer and by eliminating the liability of co-workers in most accidents. State workers’ compensation statutes establish this framework for most employment. Failure to carry workers' compensation insurance or otherwise meet a state's regulations in this regard can leave an employer exposed not only to paying these benefits out of pocket, but also to paying penalties levied by the states.

Workers compensation law is not about negligence or proving fault.  If your employee is injured while on the clock, he or she is automatically covered.  Employers are required to report to the State Board of Workers’ Compensation information about any on-the-job injury that happens to any covered employee.  Some employers try to avoid this type of coverage by claiming their employees as independent contractors. While the workers who maintain significant independence or freedom from an employer can be classified as independent contractors and not entitled to compensation for any injury sustained when performing their work, the term independent contractor is often misused. The definition of an independent contractor under state statutes has very specific guidelines in order to determine if the individual is an employee or an independent contractor. While definitions differ among jurisdictions, generally if a business owner or corporate entity has individuals working for them and they require a method, manner, time, and the type of work that the individuals are expected to perform, they cannot classify the individual as an independent contractor.

It is very important that you comply with the workers’ compensation law of your state. Each of the 50 states has its own workers’ compensation law. Generally, you must maintain workers’ compensation insurance at all times, post information about your workers' compensation coverage and where to get medical care for work injuries in a conspicuous place so that your employees can educate themselves, and, upon knowledge of an injury, you must immediatelly complete and file with your insurer’s or self-insurer's claims office an injury report.

Unfortunately, fraud is a serious problem when it comes to workers’ compensation insurance. If you suspect your employee of filing a false claim saying he/she was injured on the job while their injury really occurred elsewhere or exaggerating or falsifying injuries , you should report that opinion to your workers' comp claims administrator. Tell them all the facts you know, any witnesses you may be aware of, and the people they should talk to. Follow up any phone or verbal report with a letter. At all times, you should stay involved and maintain an open dialogue with your injured employee. Don’t assume your claims administrator is taking care of everything. If there is a problem, try to work it out as quickly as possible and be willing to make adjustments to the workplace to bring your employee back to the job.

The bottom line: if an employee gets hurt or sick because of work and you are not insured, you are responsible for paying all bills related to the injury or illness. You should be aware that workers’ compensation benefits are the exclusive remedy for injuries suffered on the job when you are properly insured. If you are illegally uninsured and an employee gets sick or hurt because of work, that employee can file a civil action against you, in addition to filing a workers’ compensation claim.

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