workers' compensation

Payments required by law to be made to an employee who is injured or disabled in connection with work.

Program providing payments, without regard to a finding of negligence of either party, to workers involved in specific job-related injuries. These laws were enacted so that the employee would not have to go through a long and arduous lawsuit and possibly not recover due to the employer's advantageous financial standing. Payments are specifically exempt from taxation.

Workers' compensation is a mandatory type of business insurance that provides employees who become injured or ill while on the job with medical coverage and income replacement. It also protects companies from being sued by employees for the workplace conditions that caused such an injury or illness.

Businesses are required by law in all fifty states to pay for the medical treatment and lost wages of employees who suffer job-related injuries or illnesses. In order to avoid crippling expenses in this regard, companies purchase workers' compensation insurance policies of one kind or another. Most states give businesses the choice of buying workers compensation policies either directly from the state or from a private insurer. Each state determines its own system's payment schedules, employee eligibility requirements, and rehabilitation procedures. Although provisions of each state's laws differ greatly, the underlying principle is the same—that employers should assume the costs of injuries, illnesses, and deaths that occur on the job, without regard to fault, and partially replace wage income lost. While income replacement under workers' compensation is usually a percentage of the actual wage, it is counted as a transfer payment and thus is not subject to federal income tax. Some state laws exempt certain categories of employees from coverage. Those most likely to be excluded are domestics, agricultural workers, and manual laborers.

Given the mandatory nature of workers' compensation coverage and the potential expense involved, the cost of workers' compensation insurance policies is a huge concern for small business owners. In fact, workers' compensation premiums stand as most companies' second largest operating expense, after payroll. These rates are based on the employer's total payroll, the classification of the employees (the relative riskiness of their work activities), and the employer's accident record.

Small business owners have less control over the cost of workers' compensation coverage than they do over health insurance costs. State legislatures set the level of benefits and employers pay the full cost, so medical cost-containment strategies like co-payments do not apply. Some insurers avoid handling workers' compensation policies for small businesses because they feel that smaller companies lack the funds to provide a safe working environment. In general, the rates depend upon the type of business, number of employees, and company safety record.

Penalties for failing to carry workers comp insurance policies can be severe. In general, business owners who are neglectful in this manner can be held liable for the medical expenses incurred by the worker in their employ. Nonetheless, many businesses engage in what is known as "premium fraud," in which they either do not carry policies or lower the costs of their policy premiums through fraudulent recordkeeping (underreporting their employee count or the wages they pay them, paying workers under the table in order to falsify the number of employees they have, misclassifying the kind of work engaged in by employees in order to reduce premiums, etc.). However, momentum is building to beef up penalties for these kinds of fraudulent actions, which injure insurers and honest employers alike. "Honest employers pick up… additional costs [of fraud committed by other companies] in the form of higher premiums," noted Rebekah Young in Washington Monthly. "But even if honest employers are able to pass along the costs of their higher premiums, that doesn't mean they aren't adversely affected by premium fraud. For example, honest construction companies lose out on projects to premium fraud-committing companies because they are underbid by these crooked companies, which have lower overhead costs thanks to their lower premium costs."

Types of Coverage Available

There are three basic methods available for employers to obtain the required workers' compensation protection: state insurance funds, private insurance, and self-insurance through insurance pools. The latter option—which involves setting aside funds in anticipation of workers' compensation claims, rather than purchasing insurance—is seen as a cost-saving method for safety-oriented firms. In the states that permit it, many large employers now self-insure, and many small businesses form groups to insure themselves and decrease the risks.

In Employee Benefits for Small Business, Jane White and Bruce Pyenson tout group self-insurance plans as a good option for small businesses with better-than-average workplace safety records. Such plans work best when the companies involved are in the same or similar industries, so that their level of risk is roughly equivalent. The companies can then join together to purchase stop-loss coverage to protect themselves against claims over a certain amount. Though self-insurance can be less expensive than private workers' compensation policies, small businesses should make sure that they have the financial resources to withstand potential losses.

Small businesses can explore a variety of other measures to reduce their workers' compensation premiums as well. These include:

Select the right insurer. Business owners seeking workers' comp insurance policies should seek out insurers with proactive claims adjusting policies. In addition, Occupational Hazards contributor Shawn Adams counsels companies to give preference to insurers who assign specific adjusters for accounts. "[When] claims are … handled on a file basis … your account is handled by whatever adjuster happens to be assigned the file for your claim. An assigned adjuster is one who can take responsibility for your account, as opposed to having different adjusters handle different claims against your policy but not coordinating the claims in a comprehensive manner."

Pay attention to your own claims trends. Businesses should take steps to monitor all aspects of their work safety record and insurance coverage, and ensure that all subcontractors carry workers' comp coverage.

Adopt policies and programs to reduce exposure to workers' comp claims. Companies can reduce premiums by minimizing the number of claims made by their workforce. This requires the implementation of safety programs in such areas as materials handling and ergonomics. "Few companies know how to prevent workers' compensation claims, or how affordable and effective ergonomic training can be in preventing such claims," wrote Mary Murray in Occupational Hazards. "Businesses don't know that ergonomic training and redesign can almost entirely be paid for with 'found' dollars that otherwise would be wasted in overfeeding their workers' compensation policy."

Further Reading:

Adams, Shawn. "Risk Management Methods to Reduce Your Workers' Compensation Rates." Occupational Hazards. March 2001.

Blakely, Stephen. "Costly Numbers in Workers' Comp." Nation's Business. September 1997.

Blakely, Stephen. "Finding Coverage for Small Offices." Nation's Business. June 1997.

Lynn, Jacquelyn. "A Quick Guide to Insurance." Entrepreneur. June 1997.

Murray, Mary. "Dispelling the Myths of Workers' Compensation." Occupational Hazards. August 1998.

White, Jane, and Bruce Pyenson. Employee Benefits for Small Business. Prentice-Hall, 1991.

Young, Rebekah. "Cheap Tricks." Washington Monthly. September 1998.

For more information on workers' compensation, visit Britannica.com.

Workers' Compensation is a system that requires employers to provide workers who suffer jobrelated injuries (and fatalities) with medical treatment and monetary compensation to replace lost income. Compensation laws were first adopted in western Europe in the late 1800s. The first workers' compensation laws to pass legal muster in the United States were enacted in 1911, and by 1920 all but five states had adopted them. The system arose due to the breakdown of its predecessor, the negligence system of liability, under which employers were required to exercise "due care" in protecting workers from danger, but could escape liability for an accident by persuading the courts that the employee had assumed the ordinary risks associated with the job, that a coworker had caused the accident, or that the worker himself had not exercised due care. In practice, the negligence system of liability meant that payment levels were low and uncertain—in the early twentieth century, roughly 40 percent of families received nothing after fatal accidents, and few families received benefits exceeding the deceased worker's annual earnings. In addition, rapid industrialization made the American workplace about the most dangerous in the world. Many states' courts became unwilling to accept the employers' standard defenses, and during the twentieth century's first decade, many states passed legislation barring the use of these defenses. This caused a crisis as employers' accident insurance premiums soared yet many workers still received minimal payments.

With the adoption of workers' compensation laws most of this uncertainty disappeared. Employers (or their insurers) were required to pay standard benefits spelled out by law. Payments generally replaced about one-half to two-thirds of injured workers' lost wages and employers wound up paying about 75 to 200 percent more to families of accident victims. Because each employer's insurance premiums became linked to its accident costs, employers gained a powerful incentive to improve workplace safety and accident rates fell—except in industries like coal mining, where workers could not be closely supervised and where the new, higher accident benefits meant that workers bore less of an injury's cost. However, employers also benefited from workers' compensation, despite their substantially increased insurance premiums. Employers' uncertainties fell, and their new costs were generally shifted to employees in the form of lower wages—except among unionized workers. In essence, workers were forced to buy insurance through their employers.

By 1940, about three-quarters of workers were covered by workers' compensation, a figure that exceeded 90 percent by the 1990s. For decades, workers' compensation costs were about 1 percent of covered payroll. Then, beginning in the early 1970s, costs began to increase, exceeding 2 percent in the early 1990s. The increase was driven by rising medical costs and the expansion of disability compensation to cover a wider range of workplace injuries and occupational diseases (such as back pains and carpal tunnel syndrome), despite falling rates of injury, illness, and fatalities. After peaking in the early 1990s, costs (as a percent of payroll) fell about 40 percent due to declining accident rates, active management of medical costs, more efficient return-to-work programs, and tightening eligibility standards.

Bibliography

Fishback, Price V., and Shawn Everett Kantor. A Prelude to the Welfare State: The Origins of Workers' Compensation. Chicago: University of Chicago Press, 2000.

A system whereby an employer must pay, or provide insurance to pay, the lost wages and medical expenses of an employee who is injured on the job.

Workers' compensation law is governed by statutes in every state. Specific laws vary with each jurisdiction, but key features are consistent. An employee is automatically entitled to receive certain benefits when she suffers an occupational disease or accidental personal injury arising out of and in the course of employment. Such benefits may include cash or wage-loss benefits, medical and career rehabilitation benefits, and in the case of accidental death of an employee, benefits to dependents. The negligence and fault of either the employer or the employee usually are immaterial. Independent contractors are not entitled to workers' compensation benefits, and in some states domestic workers and agricultural workers are excluded or only partially covered.

It is the goal of workers' compensation to return the injured employee quickly and economically to the status of productive worker without unduly harming the employer's business. A worker whose injury is covered by the workers' compensation statute loses the common-law right to sue the employer for that injury, but injured workers may still sue third parties whose negligence contributed to the work injury. For example, a truck driver injured in a rear-end collision by an unemployed third party would be entitled to collect workers' compensation and also to sue the third party for negligence. In such cases a plaintiff who recovers money from a third-party lawsuit must first repay the employer or insurer that paid workers' compensation benefits. The plaintiff may keep any remaining money. Many jurisdictions permit the employer or its insurer to sue negligent third parties on the employee's behalf to recover funds paid as workers' compensation benefits.

In most states parties to workers' compensation disputes resolve them in an administrative, rather than judicial, tribunal. Courts usually relax the standard rules of procedure, evidence, and conflict of laws to allow for expediency and simplicity in keeping with the goal of getting an injured worker the benefits necessary to return to work.

Workers' compensation statutes require most employers to purchase private or state-funded insurance, or to self-insure, to make certain that injured workers receive proper benefits. The cost of insurance is reflected in the cost of goods or services produced by the employer; thus the cost of workers' compensation liability is passed ultimately to consumers.

Workers' compensation law is somewhat unique in that negligent acts of either the employer or the injured employee generally are irrelevant to the determination of compensability. Victims of injuries not related to work in most cases must prove the negligence of another party before recovering money in a lawsuit. Conversely, a defendant in a personal injury lawsuit may avoid or mitigate liability to a plaintiff whose own negligence caused or contributed to the personal injury. Yet workers' compensation is a no-fault law, and an employee's negligence or an employer's lack of negligence is usually not a factor.

The underlying social philosophy of this no-fault system is evident when one considers what would happen without workers' compensation. For example, assume a responsible employer encourages a safe workplace and implements a rule requiring workers to obtain the assistance of a coworker before climbing a tall ladder to a storage area. One employee, hurrying to get her work done for the day, ignores this rule and climbs the ladder without assistance. When she reaches the top of the ladder, it shifts and she falls, injuring her spine and paralyzing her legs.

Society could choose to treat this injured worker in one of three basic ways. It could refuse to render any aid, instead forcing the injured worker to seek help from friends or family. If the worker was without ties to persons both willing and able to assist, this plan would leave her destitute. A second option would be to give her government aid, or welfare, such as Medicaid or food stamps. This alternative would be less speculative but still not ideal because it would force local taxpayers to pay for the worker's benefits regardless of whether they had any connection to the injury.

The third solution is the workers' compensation system. This system preserves the injured worker's dignity and well-being by providing an income and medical care and keeping her off welfare. The system passes the cost of compensating injured workers to consumers of products that, through their manufacture, cause the workers to get injured. Thus the social philosophy underlying workers' compensation is the efficient and dignified provision of financial and medical benefits to those injured on the job and the allocation of the expense to an appropriate source: the consumer.

Workers' compensation is also distinguishable from other personal injury laws where negligence is a factor because although the employer is liable for paying injured workers' benefits, the purpose of workers' compensation is not to punish or hurt the employer. For this reason, an integral component of workers' compensation is the requirement that employers purchase workers' compensation insurance, or provide a self-insured fund, to pay the benefits. This way, the employer can pass along the cost of insurance to the purchasers of the employer's product.

History

Workers' compensation laws in the United States developed during the early 1900s as a result of the industrial age and growing numbers of industrial injuries. Before these laws were developed, workers injured on the job often found themselves without remedy against their employer or their fellow workers.

The law of vicarious liability developed in England in approximately 1700 to make the master, or employer, liable for the acts of the servant, or employee. Yet the 1837 English case Priestly v. Fowler, 3 M. & W. 1, 150 Reprint 1030, created the fellow servant exception to the general rule of a master's vicarious liability; no longer would the master be held liable for an employee's negligence in causing injury to a coworker.

After Priestly, courts in the 1800s continued to develop employer defenses to liability for injured workers. One such defense, assumption of the risk, allowed employers to escape liability with the questionable logic that employees could avoid or decline dangerous work duties. Another defense, contributory negligence, allowed employers to escape liability, notwithstanding the employer's negligence, where the employee was also negligent. Therefore, during a century of burgeoning industry and its inherent risk of work-related accidents, workers faced nonexistent or inadequate remedies for their injuries.

At the end of the nineteenth century, state lawmakers recognized the problem and began studying the compensation system developed in Germany in 1884. Rooted largely in its socialistic tradition, Germany's compensation system mandated that employers and employees share in the cost of paying benefits to workers disabled by sickness, accident, or old age. Britain followed suit in 1897 with the British Compensation Act, which later became the model for many state workers' compensation laws in the United States. In 1910 representatives of various state commissions met at a conference in Chicago and drafted the Uniform Workmen's Compensation Law. Although not overwhelmingly adopted, this uniform law became the blueprint for state workers' compensation statutes. All but eight states had adopted a workers' compensation law by 1920, and in 1963 Hawaii became the last state to do so.

Accident and Injury

Workers' compensation benefits are most commonly provided to workers who are injured by a specific accident on the job, such as the worker who trips and falls down the employer's staircase, or the worker who gets a hand caught in factory machinery. But a compensable accidental injury might also include an occupational disease, such as an employee's lung disease that resulted from his exposure to asbestos in the workplace. Cumulative trauma associated with work duties, such as carpal tunnel syndrome caused by repetitive keyboard work, also can be compensable.

Jurisdictions differ as to whether work-related mental illness is compensable. In the majority of states, mental illness caused by work, such as stress, anxiety, or depression, is not compensable. A common exception to this rule exists when a specific accident or injury at work leads to mental illness. For example, an employee who suffers from panic attacks upon hearing the phone ring at work generally will not be entitled to workers' compensation benefits. But an employee who witnesses a vicious assault and battery at work, and who then develops anxiety and panic attacks as a result, would be entitled to compensation in most jurisdictions.

Requirements for Benefits

An injured worker is entitled to workers' compensation benefits only if the injury arose out of and in the course of employment. The first part of this requirement, "arising out of employment," ensures that there is a causal connection between the work and the injury. Usually the employee has the burden of proving that the injury was caused by exposure to an increased risk from employment.

In determining whether an injury is compensable, it is helpful to categorize the risk causing the injury in one of three ways. First, there is the risk that is associated distinctly with the employment. An example would be a house painter injured in a fall from a scaffold; the house painter would not have been on the scaffold but for his employment. This type of injury is always compensable as arising out of employment.

The second category of risk is risk that is personal to the claimant. An example is a worker who develops lung cancer due to years of smoking. Assuming this cancer was not caused by carcinogens in the workplace and would have developed notwithstanding employment, the disease would be considered personal and not arising out of employment. Injuries from purely personal risks are never compensable.

The third category of risk, neutral risk, is the most problematic in determining the compensability of a work injury. Neutral risks are neither distinct to the employment nor distinctly personal. Examples would include a teacher shot in a drive-by shooting while standing in his classroom; an auto mechanic bitten by a stray dog while dumping oil into an outdoor receptacle; and an executive struck by lightning when walking to his car after a meeting.

Whether an injury resulting from a neutral risk is compensable is difficult to predict and often depends on the jurisdiction of the tribunal, the nature of the injury, and the precise facts surrounding the accident. For example, injuries caused by lightning are usually compensable if the claimant can show that the work conditions increased the risk of being struck. An employee struck while working atop a metal electric pole likely would receive workers' compensation benefits for a lightning injury or death, whereas an employee struck walking to her car after her work shift would have a more difficult time collecting benefits. In Reich v. A. Reich & Sons Gardens, Inc., 485 S.W. 2d 133 (Mo. Ct. App. 1972), the employee was killed by lightning while standing next to several vehicles in a wheat field. The court deemed the death compensable, citing testimony that the employee's risk of being hit by lightning was greater than that of other people in the vicinity, who were sheltered in cars and buildings and were not standing in an open field.

Using the same logic, injuries from sunstroke, freezing, and other effects of heat and cold exposure arise out of the course of employment if the employee can show that such exposure was greater than that to which the general public was exposed. Workers who contract contagious diseases at work will receive benefits upon a showing that the workplace offered an increased risk of exposure.

Another type of neutral-risk injury is an assault. Most courts will deem an assault as arising out of the course of employment if the nature or setting of the work increased the risk of assault or if a quarrel that led to the assault originated at work. In Bryan v. Best Western/Coachman's Inn, 885 S.W.2d 28 (Ark. 1994), the claimant worked as a security guard at a motel. The claimant and the motel night clerk were involved in a personal dispute, which led to a fight between the claimant and the night clerk's boyfriend, injuring the claimant. The court held that even though the dispute was personal and not related to work, the claimant, because of his job, faced an increased risk of assault. His injuries therefore were compensable.

Even idiopathic injuries, or injuries resulting from risks personal to the employee as opposed to risks associated with the job, may be compensable if the job contributes to the risk or aggravates the injury. An employee who misses breakfast and suffers a fainting spell ordinarily will not be entitled to workers' compensation, because the fainting spell does not arise out of employment. But if the same worker faints and in so doing hits her head on her desk and fractures her skull, her injury will be compensable. In Silverman v. Roth, 9 A.D.2d 591, 189 N.Y.S.2d 311 (1959), the employee died of heart failure after suffering a heart attack and falling from a ladder. The precise sequence of events was impossible to determine. Nevertheless, the court awarded benefits, citing evidence that even if the heart attack occurred before the fall from the ladder, the heart condition would have been aggravated by the shock of the fall, and thus the fall from the ladder was a contributing factor in the employee's death.

In addition to the requirement that an injury arise out of employment, the employee seeking workers' compensation also must show that the injury arose "in the course of employment." To arise in the course of employment, the injury must take place within the employment period, in a location where it is reasonable for the employee to be, and while the employee is fulfilling work duties. This does not mean that the employee must actually be doing his job, or doing it within the precise work hours, when the injury occurs for it to be compensable. Distinguishing between injuries that do or do not arise out of the course of employment is often a difficult and confusing task.

One common issue arises when an employee is injured going to or from work. Clearly, employment necessitates that an employee travel to work and home again. Yet it is not the purpose of workers' compensation to protect the employee from the risk of travel. Courts have, through the years, reached a compromise: an employee with fixed hours and work locale going to or coming from work generally is covered by workers' compensation if the injury occurs on the employer's premises.

This rule can lead to rather harsh results, as in Heim v. Longview Fibre Co., 41 Wash. App. 745, 707 P.2d 689 (1985). There, the claimant was driving his motorcycle through the usual exit from his employer's premises when a coworker turning into the premises hit the claimant, killing him. The precise location of the crash was fewer than five feet from the employer's property, on a public access road to the plant used by company personnel. Nevertheless, the court held that the injury did not arise in the course of employment and denied death benefits. Employees injured off work premises may still recover damages in tort against any persons whose negligence caused them harm.

Some courts, recognizing the harshness of the premises rule, have attempted to extend the premises rule to include injuries that occur within a reasonable distance of the employer's premises. And most courts recognize the compensability of an injury that occurs off the employer's premises when an employee is going to or coming from work, where the trip itself is a substantial part of the employee's service to the employer. In Urban v. Industrial Commission, 34 Ill. 2d 159, 214 N.E.2d 737 (Ill. App. Ct. 1966), the employee, a traveling salesperson, was killed in a car accident while driving in the direction of his home, although the evidence was not clear that he was actually returning home. The court ruled the death to be compensable.

Benefits

Workers' compensation provides two general categories of benefits to injured workers: indemnity benefits and medical benefits. Indemnity benefits compensate for the worker's loss of income or earning capacity resulting from the work-related injury. Depending on the employee's medical status and ability to work following the injury, she may be entitled to different types of indemnity benefits. A worker whose injury is only temporary and does not preclude her ability to work her normal job duties and hours typically will not receive indemnity benefits because her injury has no effect on her ability to earn a living. A worker whose injury temporarily causes him to miss time from work will be entitled to payment of all or a portion of his lost wages, known as temporary partial disability benefits. A worker whose injury temporarily renders him unable to work at all may receive temporary total disability, which is usually a portion of the worker's average wage. A worker who is able to work at least part time but who has a work-related permanent disability may be entitled to permanent partial disability benefits. The formula for permanent partial disability benefits varies from jurisdiction to jurisdiction but usually considers the employee's average weekly wage combined with the degree of permanent disability. Finally, a worker who is permanently disabled from working at all may be entitled to permanent total disability benefits.

A frequently disputed issue between an employer and an injured employee is the degree that the employee's injury restricts her from returning to suitable employment, mitigating the need for indemnity benefits. Some state statutes permit or require the employer to provide an injured employee with vocational rehabilitation, job search assistance, or job retraining if the injury would otherwise prevent the employee from returning to gainful work.

In the case of a compensable work-related death, the decedent's spouse, dependent children, or both spouse and children may be entitled to dependency benefits. Most jurisdictions pay death benefits to a spouse until the spouse dies or remarries, and to children until they reach age eighteen. Other jurisdictions place limits on benefit amount or duration.

Employees injured on the job also may receive reasonable and necessary medical benefits that are related to the work injury. Such benefits are compensable if they serve to cure the injury, or, if the injury is incurable, relieve its effects. These benefits may include medical treatments such as sutures, casts, or surgery; psychiatric or psychological treatments; hospital, nursing, and physical therapy treatments; chiropractic or podiatric treatments; prescription medications; supplies such as wheelchairs or wrist braces; orthopedic mattresses; or attendant care services. Most workers' compensation statutes also provide for the reimbursement of the employee's travel expenses incurred in obtaining medical services.

The System Today

Workers' compensation has been criticized as an expensive component of doing business and a system made more expensive by undetected fraud. What was intended to provide the employer and the injured worker with an amicable and humane resolution of a work injury often results in contentious disputes and costly litigation. Some employees feign injury to receive wage-loss benefits, and some employers balk at providing benefits to legitimately injured workers for fear that insurance premiums will rise. But the system has been effective in keeping injured employees employed and promoting the importance of a safe workplace.

See: Employment Law; Labor Law; Master and Servant.

This article is missing citations or needs footnotes. Please help add inline citations to guard against copyright violations and factual inaccuracies. (August 2007)

Workers compensation (colloquially known as workers' comp in North America or compo in Australia) is a form of insurance that provides compensation medical care for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain." While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in worker compensation plans.

Employees' compensation laws are usually a feature of highly developed industrial societies, implemented after long and hard-fought struggles by trade unions. Supporters of such programs believe they improve working conditions and provide an economic safety net for employees. Conversely, these programs are often criticised for removing or restricting workers' common-law rights (such as suit in tort for negligence) in order to reduce governments' or insurance companies' financial liability. These laws were first enacted in Europe and Oceania, with the United States following shortly thereafter.

Contents 1 Compensation prior to statutory law 2 Statutory compensation law 2.1 Statutory compensation in Australia 2.2 Workers' compensation in Brazil 2.3 Statutory compensation in Canada 2.4 Statutory compensation in the United States 2.4.1 Statutory compensation in Florida 2.4.2 Statutory compensation in New York state 2.4.3 Alternate forms of statutory compensation in the United States 2.4.4 Opposition to statutory compensation in the United States 3 Workers' Compensation Cost Containment 3.1 Cost drivers 3.2 Policies 4 History 5 Workers’ Compensation in Brazil 6 See also 7 References 8 External links 8.1 Compensation agencies

Compensation prior to statutory law

Prior to the statutory establishment of workers' compensation, employees who were injured on the job were only able to pursue their employer through civil or tort law. ^[1] In the United Kingdom, the legal view of employment as a master-servant relationship required employees to prove employer malice or negligence, a high burden for employees to meet. Although employers' liability was unlimited, courts usually ruled in favor of employers, paying little attention to the full losses experienced by workers, including medical costs, lost wages, and loss of future earning capacity.

Statutory compensation law

Statutory compensation law provides advantages to employees and employers. A schedule is drawn out to state the amount and forms of compensation to which an employee is entitled, if he/she has sustained the stipulated kinds of injuries. Employers can buy insurance against such occurrences. However, the specific form of the statutory compensation scheme may provide detriments. Statutes often award a set amount based on the types of injury. These payments are based on the ability of the worker to find employment in a partial capacity: a worker who has lost an arm can still find work as a proportion of a fully-able person. This does not account for the difficulty in finding work suiting disability. When employers are required to put injured staff on "light-duties" the employer may simply state that no light duty work exists, and sack the worker as unable to fulfill specified duties. When new forms of workplace injury are discovered, for instance: stress, repetitive strain injury, silicosis; the law often lags behind actual injury and offers no suitable compensation, forcing the employer and employee back to the courts (although in common-law jurisdictions these are usually one-off instances). Finally, caps on the value of disabilities may not reflect the total cost of providing for a disabled worker. The government may legislate the value of total spinal incapacity at far below the amount required to keep a worker in reasonable living conditions for the remainder of his life.

A related issue is that the same physical loss can have a markedly different impact on the earning capacity of individuals in different professions. For instance, the loss of a finger could have a moderate impact on a banker's ability to do his or her job, but the same injury would totally ruin a pianist.

Statutory compensation in Australia

As Australia experienced a relatively influential labour movement in the late 19th and early 20th century, statutory compensation was implemented very early in Australia.

Workers' compensation in Brazil

The Welfare (called Instituto Nacional do Seguro Social - INSS) is the social insurance for those who contribute. It is a public institution that aims to recognize and grant rights to its policyholders. The amount transferred by the Welfare is used to replace the income of the worker taxpayer, when he loses the ability to work, by sickness, disability, age, death, involuntary unemployment, or even maternity and imprisonment. During the first 15 days worker’s salary is paid by his employers and after that by Welfare, while inability to work lasts. It is up to 75% of the workers’ wages.

The Brazilian Welfare went through several conceptual and structural changes, involving the degree of coverage, the list of benefits and how the system is financed. On the other hand, if workers intend to receive a compensation from their former employer, there is a time limit for filling a claim (2 years), which must be legally supported. Workers’ compensation laws are the same in the whole country and tend to be protective.

Statutory compensation in Canada

Workers' compensation was Canada's first social program to be introduced as it was favoured by both workers' groups and employers hoping to avoid lawsuits. The system arose after an inquiry by Ontario Chief Justice William Meredith who outlined a system that workers should be compensated for workplace injuries, but that they must give up their right to sue their employers. It was introduced in the various provinces at different dates Ontario was first in 1915, Manitoba in 1916, British Columbia in 1917. It remains a provincial responsibility and thus the exact rules vary from province to province. In some provinces, such as Ontario's Workplace Safety and Insurance Board, the programme also had a preventative role ensuring workplace safety. In British Columbia, the occupational health and safety mandate is legislated. In most provinces it remains solely concerned with insurance. It is paid by employers based on their payroll, industry sector and history of injuries (or lack thereof) in their workplace, sometimes known as "injury experience".

Statutory compensation in the United States

Workers' compensation laws were enacted to reduce the need for litigation, and to mitigate the requirement that injured workers prove their injuries were their employer's "fault". The first state law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted some kind of workers' compensation regime. Such schemes were originally known as "workman's compensation," but today, most jurisdictions have adopted the term "workers' compensation" as a gender-neutral alternative.

In the United States, most employees who are injured on the job have an absolute right to medical care for any injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities. Most employers are required to subscribe to insurance for workers' compensation, and an employer who does not may have financial penalties imposed. In many states, there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.

Workers' compensation is administered on a state-by-state basis, with a state governing board overseeing varying public/private combinations of workers compensation systems^[2]. The federal government has its own workers' compensation program, subject to its own requirements and statutory parameters for federal employees. In the vast majority of states, workers' compensation is solely provided by private insurance companies. 12 states operate a state fund (which serves as a model to private insurers and insures state employees), and a handful have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs or insurers of last resort, and they can only write workers' compensation policies. In contrast, private insurers can turn away the worst risks and can write comprehensive insurance packages covering general liability, natural disasters, and so on. Of the 12 state funds, the largest is California's State Compensation Insurance Fund. The federal government pays its workers' compensation obligations for its own employees through regular appropriations.

It is illegal in most states for an employer to terminate or refuse to hire an employee for having reported a workplace injury or filed a workers' compensation claim. However, it is often not easy to prove discrimination on the basis of the employee's claims history. To abate discrimination of this type, some states have created a "subsequent injury trust fund" which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or to make it anonymous. (See privacy laws.)

Employees may not falsely claim benefits. There have been instances where the sub rosa videos recorded by private investigators show employees engaging in sports or other strenuous physical activities, although the employees allegedly suffered disability or injury.^{[citation needed]}. Such evidence may not be admissible at a trial, if it is found that the taping infringed on the employees' reasonable expectation of privacy.^{[citation needed]}

Some employers vigorously contest employee claims for workers' compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers' compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant's legal expenses to a certain fraction of an award; such "contingency fees" are payable only if the recovery is successful. In some states this fee can be as high as 40% or as little as 11% of the monetary award recovered, if any.^{[citation needed]}

In the vast majority of states, original jurisdiction over workers' compensation disputes has been transferred by statute from the trial courts to special administrative agencies.^{[citation needed]} Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers' compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer. Ohio allows appeals to go before a jury.^[3]

Various organizations focus resources on providing education and guidance to workers' compensation administrators and adjudicators in various state and national workers' compensation systems. These include the American Bar Association (ABA), the International Association of Industrial Boards and Commissions (IAIBC), and the National Association of Workers' Compensation Judges (NAWCJ).

Statutory compensation in Florida

Florida workers’ compensation (WC) is a statutory program defined primarily by Chapter 440 Florida Statutes. Florida WC provides two primary benefits to workers with work-related injuries or illnesses. Medical care is defined by F.S. 440.13. Medical benefits may be delivered through a “managed care” plan, at the option of the employer. Indemnity, or “income replacement,” benefits are defined by F.S. 440.15. Indemnity is divided into “temporary” and “permanent.” These are expressions of “duration.” Each duration measure is subdivided into “partial” and “total” disability. These are expressions of “extent.” Indemnity is therefore potentially available for “temporary total,” “temporary partial,” “permanent partial,” and “permanent total.” Governmental oversight responsibility for the system is divided between the Division of Workers’ Compensation (DWC) and the Office of the Judges of Compensation Claims (OJCC). The DWC is part of the Department of Financial Services (DFS) and regulates the reporting of workplace injuries and illnesses. Insurance companies and self-insured employers are obligated to report claim information to the DWC thereafter. Examples of required data submissions include payment of medical bills, inception and cessation of indemnity benefits, and closure of the claim. The DWC also provides advice and assistance to injured workers through the Ombudsman or “Employee Assistance Office,” commonly called the “EAO.”

The OJCC is an independent agency within the Division of Administrative Hearings (DOAH). An injured worker seeking benefits that are not administratively provided by the employer or its insurance carrier may seek an order from the OJCC compelling provision of that benefit(s). The request is made in the form of a “petition for benefits” or “PFB,” which is defined in F.S. 440.192. Each PFB is assigned to a Judge of Compensation Claims (JCC) in the geographic region in which the accident or illness occurred. Florida is divided into 17 such regions, called “Districts.” Each District is staffed by one to five JCCs. There are 33 JCCs in Florida. The filing of a PFB automatically triggers the court to order a mediation conference, which must be held within 130 days after the filing of the petition. Many claims for benefits are resolved between the parties prior to the mediation conference. Those issues that are not resolved before or during mediation will be scheduled for trial, or final merit hearing, before the assigned JCC. The final hearing must be held and concluded within 90 days after the mediation conference is held, allowing the parties sufficient time to complete discovery. The decisions of each JCC are reviewable by the First District Court of Appeal in Tallahassee, FL.

Statutory compensation in New York state

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In March 2007, the state of New York adopted major reforms to its Workers' Compensation law. These reforms included an increase in available temporary disability payments for injured workers with the trade-off being that lifetime permanent partial disability benefits are no longer available for injuries after July 1, 2008. As with many systemic changes to broad legal schemes, the reforms have spawned significant litigation to clarify the meaning of many of the changed statutory sections. The Workers' Compensation Board has also attempted to resolve many more cases administratively, meaning that no hearing may be held to resolve a particular dispute, but this change has had unintended consequences. For example, injured workers may not sufficiently understand their rights, since an administrative decision may easily be confused with a proper legal determination (which it may not be). Injured workers are advised to consult an experienced Workers' Compensation attorney since consultation is free (a lawyer in New York cannot charge a fee regarding a Workers' Compensation claim without getting the fee approved by a Workers' Compensation Law Judge). In cities like Rochester, the Workers' Compensation Board has become a central location around which many of the experienced lawyers on both sides have located their offices.

Alternate forms of statutory compensation in the United States

Employees of common carriers by rail have a statutory remedy under the Federal Employers' Liability Act, 45 U.S.C. sec. 51, which provides that a carrier "shall be liable" to an employee who is injured by the negligence of the employer. To enforce his compensation rights, the employee may file suit in United States district court or in a state court. The FELA remedy is based on tort principles of ordinary negligence and differs significantly from most state workers' compensation benefit schedules.

Seafarers employed on United States vessels who are injured because of the owner's or the operator's negligence can sue their employers under the Jones Act, 46 U.S.C. App. 688., essentially a remedy very similar to the FELA one.

Opposition to statutory compensation in the United States

Opponents argue that workers' compensation laws may hurt the U.S. workers they were designed to help^{[citation needed]}. Large employers may have an incentive to move segments of their business—and their jobs—to areas where workers' compensation benefits (and other employee protections) are less generous or are harder to obtain. This is because the United States lacks a unified and national set of employee entitlements covering minimum wage, wage and hour, or collective bargaining rights in addition to compensation. Labor unions describe this system as a race to the bottom, as state legislatures cut employee entitlements to attract capital. Moreover, applying laws to citizens (or organisations) abroad, is an exception rather than the rule under common law.

United States employers can also move some operations to other countries where employee entitlements are much lower than in the U.S., and where there may be no workers' compensation or other legal remedies at all for workers who are injured or who are exposed to hazardous substances while on the job. Such countries may also have weaker or no legal protections available for employees in areas such as job discrimination, social security, or the right to organize or to join a trade union. Some small business owners complain that the cost of workers’ compensation, which they pay in the form of insurance premiums, places a heavy burden on them.

Economists who favor the distributism system of economics cite workers' compensation as an example of how far the modern capitalist economic system approaches what they call the "servile state" or "slavery worker" system. They say that in past times, when ownership of the means of production were more widely distributed, it would not be natural to hold an employer responsible for a worker's injury, since the worker was freely choosing to work for that employer. Distributors assert that in modern times, with the vast majority of people dispossessed of the means of production, requiring employers to have workers compensation shows how much workers really are dependent on being employed and are essentially forced to work for someone else to survive. Some distributors who feel that capitalism is heading in the direction of a slavery system feel that this will come about by workers exchanging their personal freedom for economic benefits like workers' compensation.^{[citation needed]}

Workers' Compensation Cost Containment

Many things can be done to reduce the cost of workers' compensation. While many business owners and managers initially think "workers' compensation is the cost of doing business," this is not really true and there are many controls that can be put in place inside a company to make sure an employer pays only for legitimate injuries, from the time an employee is medically unable to return to any productive task at the workplace.

This field of risk management is a specialized niche called "post loss cost containment," "injury management cost reduction," and several other names. The specialty centers around actions an employer can do to "manage" the processes in the workplace immediately after an injury occurs. There are four stages to the workers' comp cost containment process including: assessment & recommendations, design & development, implementation and rollout.

Cost drivers

The areas generally considered to be key cost drivers are:

• building management commitment,
• working with the insurance company & insurance adjusters,
• implementing an effective return to work & transitional duty program,
• coordinating medical care,
• medical cost management,
• recognizing fraud and abuse,
• self-interested defense counsel
• improving communication with employees, and
• training supervisors.

Employers should use a "holistic" approach to workers' compensation cost containment by looking at the total problem, rather than focusing only on one area such as reducing medical bills. By taking a "can do" approach, employers focus on controlling procedures within their control rather than the many things they cannot control. For example, employers cannot quickly or easily change the workers' comp laws or eliminate plaintiff's lawyers or the legal system, items that are frequently mentioned as "causes" of high workers' comp costs; however, an employer can implement a "post-injury response procedure" in their own workplace specifying what an employee must do if injured. Employers must "take charge" of those things within their control. Employers should also do after-action reviews (AARs) when an individual claimant's case has cost an extraordinary amount or resulted in extensive litigation to try and determine what went wrong. Oftentimes the biggest driver in costs is a failure to recognize a meritorious claim quickly. Delayed treatment can result in a need for much more extensive treatment and/or the futility of all efforts at healing and eventual return to competitive employment. An injured worker's sense of having been the victim of an unjust litigation process can also lead to increased rates of consequential depression and other mental health conditions which create a complicating "overlay" to an initial physical injury.

Policies

Having consistent policies and forms helps the employer remain in control of the process. Even very small companies should have a tight post-injury procedure to help management control the post-injury process. The overall goal is for 95% of injured employees to return to work within 1–4 days after the injury unless they are medically unable to perform any productive role for the employer. The time out of work should be proportionate to the length of the disability. The Average Cost Per Employee in 2006, according to the 2006 RIMS Benchmarking Survey is $618 for all employers combined.

Some documents and policies to use are:

• Transitional Duty Policy
• Work Ability Form
• Transitional Assignment Form
• Post Injury Procedure
• Worst-to-Best Benchmark Performance List
• Employee Brochure
• Introduction Letter to Employees
• Employee Acknowledgement Form
• Physician Telephone Contact Questionnaire
• Supervisors Guide to Workers' Compensation
• General Manager Best Practices

History

Workers' Compensation in the U.S. began in 1911 during the Progressive Era when Wisconsin passed the first statutory system. Other U.S. jurisdictions followed suit. In general, statutory Workers' Compensation systems strike a compromise, guaranteeing workers medical care and payment for lost time on a no-fault basis. Prior to the enactment of Workers' Compensation laws, injured workers had to file suit against employers (usually for the tort of negligence), and such legal actions had significant drawbacks for workers. At the same time, a successful suit could impose very large and unpredictable costs on an employer. Statutory Workers' Compensation systems provide for prompt payment of medical, rehabilitation, and lost time costs to injured workers, while placing limits on the cost of the system for employers. This trade-off became known as the "workers' compensation bargain"; that is, the worker traded his/her right to bring a tort suit against their employer in exchange for prompt medical care and disability payments (indemnity payments). Thus workers compensation is the original "Tort Reform."

In many states today, Workers' Compensation represents a major cost of business for employers, and there is ongoing political maneuvering by both business and labor groups to shift the compromise balance struck by Workers' Compensation statutes (for an example see California's Senate Bill (SB) 899). In general, business groups seek to limit the cost of Workers' Compensation coverage, while labor groups seek to increase benefits paid to workers.

For the commercial insurance market, Workers' Compensation represents a major line of business, although one that is sometimes problematic for the insurance industry. Premiums are large, but many insurers find it difficult to turn a profit in many states, as benefit costs sometimes exceed premiums. This line of insurance is regulated fairly closely by most states, although in recent years many states have allowed insurance companies greater flexibility in pricing this line of coverage. The hope has been that by encouraging price competition among insurers for Workers' Compensation insurance, employers would benefit by being able to obtain lower overall premiums. However, the introduction of competitive pricing for Workers' Compensation insurance has also led to significant swings in cost, as the insurance market moves between 'hard' and 'soft' markets. Employers often benefit from lower premiums in 'soft' insurance markets, only to see their premiums increase exponentially during 'hard' insurance markets.

Injured Workers sometimes complain that insurance companies do not treat them fairly or in compliance with the law, while employers often complain about their costs of insurance being driven up by exaggerated or fraudulent claims. Thus, the field engenders a considerable amount of controversy and litigation. These disputed areas include both claims and premium computations.

The statute of limitations for filing a compensation claim for an accidental injury varies from state to state.

Workers’ Compensation in Brazil

The Welfare is the social insurance for the person who contributes. It is a public institution that aims to recognize and grant rights to its policyholders. The amount transferred by the Welfare is used to replace the income of the worker taxpayer, when he loses the ability to work, by sickness, disability, age, death, involuntary unemployment, or even maternity and imprisonment.

The Brazilian Welfare went through several conceptual and structural changes, involving the degree of coverage, the list of benefits and how the system is financed.

If one cannot work, his employer pays for the first 15 days and the Welfare pays from the 16th day on, while he is unable to work.

In the other hand, if worker intends to receive a compensation from his former employer, there is a time limit for filling a claim (2 years), which must be legally supported. Workers’ compensation laws are the same in the whole country and tend to be protective.

See also

Organized Labour portal

• Compensation of employees
• Experience modifier
• Injury cover
• Labour power
• List of US Workers' Compensation Insurers
• Living wage
• National Council on Compensation Insurance
• Subpoena duces tecum
• Transferable Skills Analysis

References

1. ^ The Encyclopedia of Work-Related Illnesses, Injuries, and Health Issues
2. ^ http://www.healthharbor.com/WorkComp.html
3. ^ See Ohio Rev. Code Section 4123.512.

External links

• WorkersCompensation.com The National Workers' Comp website, offering rules, statutes and more for all 50 states
• California Worker's Comp Executive The Workers' Comp Executive, since 1991, has been and remains the journal of record for the workers' comp industry in California.
• [1] [Florida Office of Judges of Compensation Claims]
• [2] Florida Division of Workers' Compensation
• [3] National Association of Workers' Compensation Judges
• Transitional Duty Calculator Return to Work Calculator
• Cost of WC Calculator Cost of Workers Comp Calculator
• WC 101 - Workers' Compensation 101
• WC Abbreviations- Workers' Compensation Abbreviations
• WC Cost Containment Blog - WC Cost Containment Tips
• Canadian Injured Workers Society
• History of Workers' Compensation in the U.S. by Price Fishback, University of Arizona
• All 50 States' and D.C.'s Home Page and Workers' Compensation
• U.S. Workers' Compensation State Regulations: Clickable Map - U.S. 50 State Regulations, Longshore & Federal Laws
• Social Ministry of Brazil
• Online Guide to WC - Online Guide to Workers Compensation Insurance
• Glossary of WC Terms - Glossary of WC Terms
• WC Blog - Award Winning Workers' Compensation Blog

Compensation agencies

• Association of Workers' Compensation Boards of Canada
• California Department of Industrial Relations - Division of Workers' Compensation
• Maryland Workers' Compensation Commission
• Texas Department of Insurance - Division of Workers' Compensation
• South Carolina Workers' Compensation
• Workers' Compensation at the Open Directory Project

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