Whether you’re a coal miner in West Virginia, an auto assembly-line specialist in Michigan or a retail salesperson in New York, workers compensation is the primary financial safety net if you’re injured on the job and unable to work.
Workers comp insurance, which covers medical bills and lost wages due to on-the-job injuries (regardless of fault), is the tie that binds together the American labor force. According to the most recent statistics, workers comp covered an estimated 135.6-million United States citizens in 2015. Coverage is extended to an estimated 97.2% of jobs covered by unemployment insurance and 86.3% of all jobs held in the employed workforce.
Workmans comp is omnipresent and mainstream.
But not all workers comp policies are created equally. Apart from the federal workers comp system, which covers employees of the U.S. government, the benefits are established by state statutes and enforced by different laws and requirements, sometimes geared toward a dominant industry in that state.
In other words, what works in California might not fly in Wisconsin.
Each state’s system differs in the details, usually in procedural rules, but the overall structure and operation of workers comp has similarities from state to state. For details of your state’s law, contact your state department of industrial relations or workers comp. Phone numbers for workers comp officials in your state are found on the website for your state workers compensation board.
Workers Comp Insurance Laws
What’s important to know about workers compensation laws? Here are some basics.
Under the workers compensation system — in almost every state — most employers are required to purchase insurance for employees in case they become injured or ill due to the job.
Generally, the employee receives workmans comp benefits regardless of who was at fault. Generally, the employer receives protection from potential lawsuits by injured employees, who otherwise could seek money damages for pain and suffering if the workers comp system did not exist.
Win-win. Sounds simple, right?
Let’s dig deeper.
Every state (except Texas) requires most employers to carry workers compensation insurance. Details vary, but that means employers with just one employee must have coverage in most states. Some states have a minimum of two to five employees. Other states exempt some agricultural and construction businesses, while charities can opt out of the system.
But even in opt-out situations, there are policies to follow. Private employers in Texas may not be obligated to carry workers comp coverage, but they must comply with reporting and notification requirements. Large employers in any state can insure themselves, but they must comply with their state and adhere to stringent self-insurance requirements.
It’s important to follow proper workers comp policies. If an employer attempts to cut corners, results could be catastrophic — and costly.
For example, if an employer goes without workers comp insurance, an injured employee can sue in civil court. Some states have backup funds to cover uninsured employees, but then they will go after the employer for reimbursement of those benefits. If the employer doesn’t have legally required insurance, it prompts criminal charges and steep fines.
Employers must also maintain standards because workers comp laws don’t offer protection from all employee lawsuits due to injuries. If employees are injured because of intentional actions by the employer, some states allow a bypass of the workers comp system. That could mean a lawsuit, including punitive damages (to punish the employer), plus pain and suffering mental anguish, physical discomfort and loss of enjoyment of life due to the injuries.
Employees can also sue third parties — outside of workers comp — such as manufacturers of defective products or another driver in a work-related car accident.
Well before an injury, employers must comply with a multitude of responsibilities under workers comp laws.
Employers must post required notices in a convenient location (and provide to new hires) that are designed to:
- Include information about employees’ rights, including the right to receive medical treatment.
- Give details about available workers comp benefits.
- Provide the name of the company’s workers comp carrier or the fact that the employer is self-insured and who is responsible for adjusting claims.
Also, employers must provide injured employees with a workers comp claim form within 24 hours after the employee gives notice of an on-the-job injury or work-related illness. If the employer knows about the injury, it is still obligated to provide the form, along with written information about the employee’s rights, available benefits and how to file a claim.
Definition of an Employee
We have spelled out many workers comp rights for the employee, but that leads to a more important question: What is an employee?
Sample wording for the definition of an employee might go like this: “A person who acts under a contract for hire for wages or other forms of renumeration, subject to the terms, conditions, hours, and rules promulgated by the employer. The employer has the right to control and direct the activities of the employee who performs the services, not only as to the result to be accomplished, but also as the methods and means by which the result is obtained.’’
In the workers comp world, there are distinct differences between an employee (covered by workers comp) and an independent contractor (probably not covered). The difference means everything.
According to the Internal Revenue Service, there are two key points that clearly define an employee:
Control — This means behavioral control – what work is accomplished and how it is done – along with financial control (how the worker is paid, if the worker’s services can be offered elsewhere in the market, how the worker utilizes the company’s tools and facilities).
Relationship — This involves written contracts describing the relationship, whether the worker is provided employee-type benefits (insurance, pension, sick pay), the permanency of the relationship and whether the worker’s services are considered a key aspect of the company.
Twenty-seven states (Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Louisiana, Maine, Minnesota, Mississippi, Montana, Nevada, New Hampshire, New York, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming) have laws that differentiate between independent contractors and employees.
The other states use court decisions or common law (pretty much the IRS definition) for their determinations.
Workers Comp Exemption
Most businesses with employees must pay the cost of workers compensation insurance, but there are some exceptions. Some small businesses and small-business owners (that are classified as employees) can be exempted from paying these costs. Other exemptions include workers who are considered non-employees, such as contract workers.
Independent contractors can include freelancers, domestic workers in private homes and construction workers. Some states exclude casual or seasonal workers when the work done isn’t part of the employer’s regular business or profession.
Some states use a Workers Compensation Waiver or Exemption form to exempt individuals such as independent contractors from the payments, although the filing requirements differ widely from state to state. In some states, independent workers are required to affirm that they are “free from control’’ for specific occupations. The statement typically must be notarized and a fee is charged for the waiver/exemption declaration.
Some states exempt sole proprietors, LLC owners and partners in partnerships. The most common of these exemptions occurs in the construction industry.
If a business classifies its workers as independent contractors and exempts them from workers comp coverage, the company could face potential fines if the state decides the workers have been classified incorrectly. Each state’s labor code defines the criteria for employees, so it’s important to get it right.
Workers Compensation Board
Because each state has its own workers compensation laws, the oversight of those stipulations are enforced on a state-by-state basis.
Each state has a Workers Compensation Board (which might be called a different name) with appointments made by the governor. Each board operates a little differently. For example, the New York board has 11 commissioners, who serve seven-year terms. The West Virginia board has three members (no more than two from the same political party), who serve six-year terms.
But each board has the same function. They are government agencies that make rules and regulations, while also reviewing disputes under workers comp statutes.
The board will work with all levels of a dispute, including the amount of compensation, while sometimes supervising voluntary settlements or agreements.
A History of Workers Comp Laws
The first form of workers comp was enacted in 1908 by the federal government, which covered its civilian employees who were engaged in hazardous work. The rest of the federal workforce was covered in 1916. By 1921, all but six states (and D.C.) had workers comp laws.
With the rise in workers compensation requirements, work safety became a front-burner issue, thus starting a long-term decline in work accidents and injuries. Hazardous industries such as railroading, mining and manufacturing suddenly became interested in safety. It led to stipulations such as workers wearing hard hats and safety glasses, while also setting up safety departments that were operated by engineers.
In 1913, companies founded the National Safety Council to pool information. Government agencies such as the Bureau of Mines and National Bureau of Standards added scientific support.
As workers comp evolved, some off-shoot coverage was formed, such as the Coal Mine Health and Safety Act of 1969, which provides monthly cash benefits to coal miners disabled by black lung disease, as well as their dependents or survivors.
Even with the changes to account for modern workforce life, one thing has remained the same. It’s important to be educated in the field of workers comp and know how the system works. That knowledge will be advantageous for any worker if the insurance is needed to cover a claim.
About The Author
Joey Johnston has more than 30 years of experience as a journalist with the Tampa Tribune and St. Petersburg Times. He has won a dozen national writing awards and his work has appeared in the New York Times, Washington Post, Sports Illustrated and People Magazine. Joey can be reached at email@example.com.
- N.A. (2019) State Workers Compensation Sites. Retrieved from https://www.statelocalgov.net/50states-workers-compensation.cfm
- Sanford, M. (2019) Workers Compensation Requirements by State. Retrieved from https://help.payrollcenter.com/hc/en-us/articles/201846509-Worker-s-Compensation-Requirements-by-State
- N.A. (2017, October) Workers Compensation: Benefits, Coverage and Costs. Retrieved from https://www.nasi.org/sites/default/files/research/NASI_Workers%20Comp%20Report%202017_web.pdf
- N.A. (2017, June 7), Workers Compensation Law: State by State Comparison. Retrieved from https://www.nfib.com/content/legal-compliance/legal/workers-compensation-laws-state-by-state-comparison-57181/