MMC, Inc. HR Tip June 2010 Volume 2 Issue 6

Workers’ Compensation Basics

Written by: Karina Gutierrez, Workers' Compensation | Claims Coordinator
Co-Author: Crystal M. O'Brien, Esq.

In a time where employers are doing what they can to ensure business costs remain within a reduced budget, it can be frustrating that one expense never seems to go away – the cost of maintaining workers’ compensation insurance. And for good reason!  A business truly cannot afford to be without workers’ compensation insurance. 

A common question many employers ask is: “Why do I need workers’ compensation insurance?”  The reasons are outlined below.

Workers’ Compensation Insurance Is Compulsory (Required By Law)

In the United States, all but a very few states* require employers to maintain workers’ compensation insurance. This is because the Workers’ Compensation Act, which was established in the early 1900’s, protects both employers and employees from workplace accidents. It requires all employers to make sure that monies are set aside either through an insurance policy or reserve fund for on-the-job injuries. Workers’ compensation plans, in addition to the Occupational Safety and Health Act, assure that employees have peace of mind, knowing their workplaces are safe from hidden hazards and if they by happenstance are injured on the job, they will not have to suffer the financial devastation that can occur when an unexpected illness/injury occurs. Most importantly, employees are relieved from having to defend their actions or finding fault with others to make sure they receive medical attention for on-the-job injuries. Why? Because workers’ compensation is a no-fault system that assures medical treatment and supplemental wages are available to injured workers. 

Workers’ Compensation Ensures Business Profitability

American businesses can better manage profit margins if they generally do not have to reserve or spend limited resources defending allegations of fault related to injured workers claims. Thus, workers’ compensation insurance makes sure all interests are protected. Moreover, it provides for an “exclusive remedy” which means that the system contains, as a matter of law, everything the employee and employer need to control how the injury occurred, why, and what to do in the future to prevent similar injuries --- in addition to making sure the workers’ medical and living expenses are provided (as a covered insurance benefit).  

Employers Shall Not Retaliate

To promote the exclusive remedy benefits of the workers’ compensation system, federal law forbids employers from discouraging, harassing, or intimidating employees who bring claims.  This means that employers can be required to pay money damages if they engage in overt acts (such as demotions, terminations, and subjecting the worker to a hostile workplace) simply because a worker makes use of the workers’ compensation insurance coverage. 

What does this mean for managing personnel issues? Courts recognize that an injured worker will not have more rights because of their injury, so a worker who was being progressively disciplined will not have refuge from their bad work performance by filing a workers’ compensation claim. An injured worker, who was not entitled to a promotion, will not become a premium candidate for a particular job just because he or she is injured.  And employees who cannot return to work for months after their accident will not necessarily be afforded an accommodation of job protection merely because he or she is out from work due to a workers’ compensation insurance claim. 

However, an employee cannot be made to feel as if he or she should quit because he or she has exposed their employer to a workers’ compensation claim. This will not be tolerated by the courts. The employer will have to pay damages to an employee who takes objection to being forced out of employment due to exercising his or her rights to bring a workers’ compensation claim.

Conclusion

While Workers’ Compensation insurance can be a costly business expense, the financial damages incurred by not acquiring the proper insurance protection can prove to be much more costly. Through the workers’ compensation system, employers and employees mutually benefit. To learn more about how you can take advantage of safety programs and incentives which can lower your workers’ compensation insurance costs, please feel free to call our Risk Management Department at (800) 899-MMCI (6624), ext. 5130.

* Only Texas and New Jersey allow employers to opt out of carrying workers’ compensation reserves and/or insurance.  However, employers in these states remain liable for providing protections to injured workers from medical bills and lost income inherent to suffering an on-the-job accident.

MMC HR Tip Archive

MMC HR E-Newsletter Archive

Subscribe MMC's free HR e-newsletter here