Workers' compensation provides benefits to workers who are injured on the job or have a work-related illness. Benefits include medical treatment for work-related conditions and cash payments that partially replace lost wages. Temporary total disability benefits are paid while the worker recuperates away from work. If the condition has lasting consequences after the worker heals, permanent disability benefits may be paid. In the case of a fatality, the worker's dependents receive survivor benefits.
Before workers' compensation laws were enacted, an injured worker's only legal remedy for a work-related injury was to bring a tort suit against the employer and prove that the employer's negligence caused the injury. Under the tort system, workers often did not recover damages; those who did recover damages sometimes experienced delays or high costs in doing so. Although employers generally prevailed in court, they nonetheless were at risk for substantial and unpredictable losses if the workers' suits were successful. Ultimately, both employers and employees favored legislation to ensure that a worker who sustained an occupational injury or disease arising out of and in the course of employment would receive predictable compensation without delay, irrespective of who was at fault. As a quid pro quo, the employer's liability was limited. Under the exclusive remedy concept, the worker accepted workers' compensation as payment in full and gave up the right to sue the employer.
Workers' compensation programs are designed and administered by the states. The programs vary across states in terms of who is allowed to provide insurance, which injuries or illnesses are compensable, and the level of benefits. Generally, state laws require employers to obtain insurance or prove they have the financial ability to carry their own risk (that is, to self-insure).
Workers' compensation is financed almost exclusively by employers. Many employers are also experience rated, which results in higher (or lower) premiums for employers whose past experience demonstrates that their workers are paid more (or fewer) benefits than workers for similar employers in the same insurance classification.
Whether an employer is required to participate in a State’s workers’ compensation system depends on the number of people employed and, in some cases, the type of business. State workers’ compensation laws spell out these requirements. For example, sole proprietors and partners, domestic and casual employees may be exempt from a State’s workers’ compensation system. To confirm employer coverage, please check your State requirements by clicking here.