Protect Your Business from Costly Complications

Workers’ compensation is a mandatory, state-based insurance program designed to protect employees from work-related injuries and illnesses. Affected employees receive certain medical and wage benefits, regardless of who was at fault, while employers are insulated from costly lawsuits and other legal complications.

Workers’ compensation for private companies is governed by state, not federal law, so the rules for coverage vary. Your individual state will dictate details such as:

• Amount of coverage you must purchase
• Types of employees who qualify
• Percentage of wages paid for temporary disability

Coverage Is Not Optional

Your business is responsible for paying the entire insurance premium. A number of factors determine the amount of your premium, including your industry classification, your company’s past history of work-related injuries (known as your experience modification) and your payroll. You can choose to purchase workers’ compensation insurance from a private insurance company or a state-run workers’ compensation insurance fund, if available. Larger employers, if approved, may be eligible for self-insurance as a third option. Failure to carry workers’ compensation carries fines and penalties.

Common Exclusions

While most employees are covered under workers’ compensation laws, some individuals may be exempt, such as domestic, farm and other “casual” workers. Because they’re self-employed, independent contractors are also excluded. (Beyond the state level, other types of employees may be covered by federal laws, such as the Federal Employment Compensation Act that covers most federal employees and the Longshore and Harbor Workers’ Compensation Act that protects maritime employees.)

Misclassifying employees as independent contractors, where a business mislabels workers to circumvent coverage requirements, is a major source of employer fraud with workers’ compensation carriers. Be aware that several states have taken steps to crack down on this type of abuse.

To reiterate, most on-the-job injuries are covered on a no-fault basis, meaning benefits are paid regardless of who is to blame for the incident. Covered injuries and illnesses can range from individual accidents, such as a bad fall, to occupational issues that occur gradually over time, such as carpal tunnel syndrome or exposure to workplace chemicals. Keep in mind, too, that the injury or illness does not have to occur in the workplace. Employees injured in the following situations are still entitled to workers’ compensation:

• Traveling on company business
• Running a work-related errand
• Attending a business-related social function

It’s essential that your business not discriminate against or force the resignation of an employee who has filed a claim under workers’ compensation. An employee who can prove interference with a claim or retaliation could file a civil lawsuit to seek punitive damages. An employee could also sue your business if he or she is injured due to your intentional or reckless actions.

Misclassifying employees as independent contractors, where a business mislabels workers to circumvent coverage requirements, is a major source of employer fraud with workers’ compensation carriers.

To sure your business is in compliance, be certain you:

• Carry the workers’ compensation coverage required by state law
• Properly classify all eligible employees, as defined by your state
• Post the required workers’ compensation notice in a conspicuous place to inform employees of their rights
• Provide appropriate claim forms to injured employees within 24 hours of learning of an incident
• Furnish written information to employees about their workers’ compensation coverage and instructions for filing a claim

The requirements for reporting an incident differ in each state, including the time period for submitting the report – either by your business or your insurer.