Workers' Compensation

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.