Workers' Comp Laws

What is a Workers Compensation Act?

A Workers' Compensation Act is the legal statement for each states' current workers comp laws. An Act establishes the broad legal principles and polices used to interpret state laws under work comp coverage. Administrative law judges and appeal boards must follow a states' Workers' Comp Act for any related hearings or legal determinations. Each state has its own workers' compensation acts and they can only be changed via new state legislation.

Federal Workers' Compensation Insurance

The United States federal government administers its own workers compensation program for federal employees. The program is known as FECA, or the Federal Employees' Compensation Act. While the federal workers' comp system is similar to our state systems, it is self-insured by the U.S. government via our tax dollars. It pay for lost wages, medical expenses, disabilities, and death benefits to all civil service employees.

Is Workers Compensation Required by Law?

All states except require employers to buy workers' compensation insurance to cover injured workers when they have one or more employees, except Texas and Oklahoma. Generally, it does not matter whether or not the employee is part-time or full-time. If a business owner does not provide coverage under a workmans comp policy, they can be sued by an injured employee seeking to recover lost wages or medical expenses. Each state impose financial penalties for failure to comply with state laws.

Why Are There Work Comp Laws?

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". Every state has enacted some kind of workers' compensation program or act. Such schemes were originally known as "workman's compensation insurance," but today, most jurisdictions have adopted the term "workers' compensation".

Who is Exempt from Workers Compensation Insurance?

Most states have very clear laws indicating when certain individuals, such as owners and family members, can be exempt from coverage. Owners typically have to own 10%, or more, of a business in order to be exempt. States often require contractors to carry workers compensation insurance even when they have no employees. A few states have special exemptions for domestic employees, volunteer workers and certain other categories of workers.

State Insurance Fund

Generally speaking, workman's comp insurance policies are available to employers through private commercial insurance companies or state-controlled carriers. Private insurance companies get to pick and choose which class codes they want to underwrite. They also set their own criteria for things like years of prior coverage and maximum experience modification ratings they want to quote. When private insurance companies determine that a business or industry is an excessive risk, the can say reject a submission. When no private carriers are willing to offer a policy, a business can still buy coverage through an assigned-risk program or state pool. These are known as State Insurance Funds.

In most states, workers compensation is solely provided by private insurance companies. However, some states operate a state fund program (similar model to private insurers and often insures state employees). There are a few states that operate a state-owned monopoly which prevents other carriers from offering coverage in the state. Learn more about workers compensation laws in your state

In order to keep the state funds from directly competing with private insurers, most state funds are generally required to act as assigned-risk programs. These programs are otherwise known as the carrier of last resort. Often times, assigned risk carriers only write workers' compensation policies if a standard market or private insurance carrier is not willing to offer a quote for coverage. In contrast, private insurance carriers can turn away the worst risks and many can also write comprehensive insurance packages covering general liability, auto, etc.

How State Laws Differ for Workers Comp?

While many state insurance directors communicate with other insurance departments and model their insurance regulations in a similar fashion, the biggest differences often come down to when and how the rules apply to a business. Some of the most common difference include:

• When a company is required to carry coverage by law
• State specific classification codes and workers comp rates
• How many employees are required before coverage is required
• Whether or not private insurance carriers are allowed to compete in the state
• How different entity types are treated for coverage
• When owners must be included for coverage and payroll requirements
• When owner can be excluded from coverage and required documentation
• Special rules for contractors or other business types
• Special laws for waivers of subrogation and out of state work
• Cancellation rules, enforcement and compliance penalties
• Rules for claims handling and benefit payments
• State forms and notification requirements
• Regulations regarding premium discounts, and policy credits

Each states' Department of Insurance is responsible for establishing laws regarding coverage in their state. Most states make changes to some rules each year, including: approved insurance rates, minimum and maximum payroll for owners, disability payments and benefit pay-out schedules. Other rules like such as who is required to buy workers compensation insurance don't change very often.

Workers' Compensation Rights- Employees

In most states, it is illegal for an employer to terminate or refuse to hire an employee after having reported a workplace injury or for filing a workers' compensation claim However, it is often not easy to prove discrimination on the basis of an employee's claims history. To avoid discrimination of this type, some states have created a "subsequent injury trust fund". This fund will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable work comp injury. Some states have recently discussed new laws to prohibit inclusion of claims history in databases, or to make it anonymous.

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