Workers' Compensation - Supervisor Briefing
Author: Michael C. Jacobson, XpertHR Legal Editor
This Supervisor Briefing examines the law and best practices regarding employee injuries suffered in the workplace, illnesses that may result from working and the (primarily) state-specific workers' compensation programs that provide wage replacement and medical benefits to injured or ill employees. This Supervisor Briefing also reviews best practices for employers and supervisors insofar as defending against workers' compensation claims and navigating through the claims process.
Supervisors and managers are the first line of defense when it comes to receiving and reporting claims up the chain of command. That means they may have to create accident reports, collect data and information, comply with reporting requirements both inside and outside of the organization and proactively strive to prevent safety incidents.
This Supervisor Briefing covers the following topics:
- Workers' Compensation Programs
- Accident Prevention and Response
- Employers Covered by Workers' Compensation
- Employees Covered by Workers' Compensation
- Compensable Injuries and Illnesses
- Wage Replacement and Medical Benefits
- Workers' Compensation Claims Process
- Test Yourself
The Supervisor Briefing may be used in conjunction with this PowerPoint presentation for training purposes. The PowerPoint presentation can be customized and adapted to fit your organization's needs.
Workers' Compensation Programs
Workers' compensation is an insurance program that requires employers to compensate employees, either directly or through an insurance carrier, for work-related injuries or illnesses. Workers' compensation is primarily run by states and is considered a "no-fault" system, meaning that an employer is required to provide compensation or insurance regardless of "fault" when it comes to injuries or illnesses.
In exchange for the no-fault liability, an employer gains exemptions (in the vast majority of cases) from exposure to civil litigation. Thus, an employer may be liable for workers' compensation benefits, but not for huge jury verdicts.
Workers' compensation benefits typically include wage replacement benefits, medical treatment and vocational rehabilitation to certain employees or their dependents, but only if the employee qualifies for benefits under either a federal or state insurance program.
Federal workers' compensation programs include:
- Federal Employees' Compensation Act (FECA): Provides coverage to civilian employees of the federal government or federal agencies in the form of medical benefits, wage continuation, disability compensation, vocational rehabilitation and death benefits. This particular statute covers primarily postal workers, employed both inside and outside the US.
- Longshore and Harbor Workers' Compensation Act (LHWCA): Provides coverage to employees of companies that employ full-time or part-time employees for maritime work or in a maritime occupation on US navigable waters or in "adjoining waterfront areas" like bays, rivers and lakes. This coverage requires an employer to fashion "suitable alternative employment" to covered employees who are injured on the job.
- Merchant Marine Act of 1920 a/k/a the "Jones Act": Provides coverage to deck hands, engineers, mates and basically all persons involved in the maritime "offshore" industry. This coverage requires employers to compensate, treat and repatriate injured workers, but is one of the few programs which uses a fault-based system to calculate awards to an injured seaman.
- Black Lung Benefits Act (BLBA): Provides wage replacement and medical benefits coverage to coal miners who are totally disabled from "pneumoconiosis" (black lung disease) arising from employment in or around coal mines in the US. Also provides coverage to survivors of miners who died from black lung disease.
- Energy Employees Occupational Illness Compensation Program (EEOICP): Provides lump sum payments and medical benefits to some employees of the Department of Energy who work with nuclear weapons development and who experience illnesses or disease related to exposure to radioactive or toxic substances in the workplace.
- Federal Employers Liability Act (FELA): Provides coverage to railroad workers who are injured on the job, but only if the worker can prove that his or her employer was at least "partly at fault" in causing the injury or injuries in question.
For individuals who are not covered by these federal programs or statutes, their only other option is to look to state-specific regulations to determine if they are covered by workers' compensation regulations and if so, whether they are eligible for benefits.
Each state has its own regulatory scheme which determines whether a particular employer is required to furnish workers' compensation insurance, whether a particular type of individual associated with that employer is covered by the insurance, whether the injury or illness in question is "compensable," what wage replacement and medical benefits an injured or ill individual is eligible for, and the process by which claims are filed, examined, argued, appealed and resolved.
Accident Prevention and Response
Considering that workers' compensation is a primarily state-driven program, any requirements for employers pertaining to accident prevention would also derive from state law. Common accident prevention protocols include surveys, recommendations, training programs, consultations, and analyses of accidents, industrial hygiene and industrial health services.
Some states may require these types of protocols in order to qualify for workers' compensation insurance, while others may simply make these protocols "recommended" for employers to minimize their exposure to workers' compensation claims and ultimately, benefits.
Generally speaking, an employer should strive toward accident prevention, despite the fact that workers' compensation is a no-fault system. The fewer claims made against employers for benefits, the less risky the employer will be in terms of its insurability, and thus, the cheaper the employer's workers' compensation insurance premium may be (also depending on state regulations). This is where supervisors and managers can play a crucial role for their organizations. Regular safety inspections, compliance with OSHA regulations and proactive safety training can substantially reduce the number of claims an employer may face, which certainly will reduce its workers compensation footprint.
Supervisors may be asked to create safety training curricula for employees, to hold regular worksite safety meetings and to collect signatures and acknowledgments from employees who have completed courses or who have attended safety meetings. These records are crucial for the organization both in preventing incidents, but also in responding to those incidents and defending the rights of the organization.
Accident prevention can take many forms in the workplace, but accident response is typically much more formalized. Most organizations have their own internal reporting regulations which supervisors and managers must comply with initially. Thereafter, responsibilities may include:
- Required reports to state workers' compensation agencies;
- Required reports to the state departments of labor; and/or
- Stringent reporting requirements from an employer's insurance provider.
Reports to government agencies must typically be completed using particular forms or requiring particular types of supporting documentation like medical reports and photographs. Failure to abide by state-specific regulations may expose an employer to fines and penalties.
Failure to abide by an insurance company's accident reporting deadlines and procedures is one of the most problematic areas for employers and business owners pertaining to workers' compensation. In that regard, it is crucial for supervisors, managers, HR professionals and business owners alike to understand the exact requirements of their workers' compensation insurance policy. By doing so, they can generate internal policies and protocols that ensure reports of accidents or injuries are communicated to the insurers in a timely fashion.
Timely accident reporting to the insurance carrier is the single most important aspect of accident response for organizations with employees. Failure to report claims to an insurance company on a timely basis may permit the insurance company to "disclaim" coverage for the accident or illness that was reported late, leaving the employer to provide compensation and benefits to the employee directly.
In addition to timely reporting of accidents or illnesses to insurance carriers, supervisors and managers may also be responsible for timely reporting of incidents to HR and to facilitate exchange of paperwork with employees. They may be asked to generate and file accident reports internally, to communicate with employees regarding their medical condition following the incident(s), and to ensure employees remain informed of their rights and responsibilities in the workers' compensation program.
Employers Covered by Workers' Compensation
In addition to the employers of individuals covered under the federal workers' compensation programs, most businesses will also be covered by workers' compensation requirements at the state level. Again, this will be determined based on state-specific regulations that may be quite broad or quite narrow depending on the state in question.
In Colorado, for example, any employer with "one or more full-time or part-time employees" must have workers' compensation insurance coverage. By contrast, in Texas, no employers are required to carry workers' compensation insurance coverage, but instead, they may elect to do so. Employers that elect not to obtain workers' compensation insurance in Texas are exposed to claims of injury or illness in civil courts, meaning they could be subject to large jury verdicts.
Some states will also carve out specific requirements in their workers' compensation statutes to extend coverage to particular types of individuals employed by specific types of companies. New York, for example, deliberately extends coverage to companies or organizations that employ newspaper delivery workers and taxicab drivers, among others.
Some states may expand liability for employers who associate or contract with particular types of vendors or partners. In California, for example, employers are exposed to enhanced liability under the state's workers' compensation program if they enter into agreements with "labor contractors" who themselves may be exposed to wage and hour claims. In those scenarios, the wage and hour claims may actually extend to the California employer if it "knew or should have known" that the agreement in question would not include sufficient funds to enable the contractor to comply with labor regulations.
In states where an employer is covered under the workers' compensation program, it may have the option to purchase workers' compensation insurance from a licensed provider or to "self-insure" against workers' compensation liabilities. To obtain self-insurance, the organization may be required to disclose financial information to the state regulatory agency that administers workers' compensation. The state will then determine whether the employer is financially viable enough to cover workers' compensation liabilities.
Employees Covered by Workers' Compensation
Only certain individuals will be covered by workers' compensation, depending on their relationship to the organization and the manner in which they were injured or contracted an illness. These things will also depend on state law and the interpretation of those laws by state courts. Typically, the scope of coverage is quite broad, as the state workers' compensation program will cover most employees.
Generally, independent contractors are not covered by state-specific workers' compensation schemes. These individuals represent the largest exception to the typically expansive nature of workers' compensation coverage. Most states will use a multi-faceted test to determine whether an individual qualifies as an independent contractor. The test typically involves questions of who really controls the work the individual does, who has the power to hire or fire him or her and ultimately, who is actually reviewing the quality of the individual's work.
Again, some states will carve out specific groups of individuals for whom coverage should be extended or revoked. In California, professional athletes are specifically covered by the state's workers' compensation scheme, but only if they are employed by in-state teams and if the injuries or illnesses they suffered are directly attributable to the time spent with those in-state teams.
In Montana, coverage is specifically revoked for employees of Montana companies who "solely" travel to North Dakota for work. To receive coverage under Montana's statute, those individuals have to maintain a meaningful relationship with a Montana location of the business in question. This is yet another example of why it's important to be familiar with local regulations.
Importantly, every state in the US (together with Washington, D.C.) provides some form of anti-retaliation protection to employees who have either experienced a workers' compensation-eligible injury or illness, who have filed a claim for wage replacement and/or medical benefits, or who participate in the workers' compensation process by giving information to investigators.
In most cases, the state-specific workers' compensation scheme has anti-retaliation and anti-interference language built into it. In other cases, the state labels retaliation in this context as a violation of public policy. This may mean that the aggrieved individual is eligible for a "wrongful termination" lawsuit outside of the workers' compensation program, which may expose an employer to jury verdicts and high legal fees.
Compensable Injuries and Illnesses
Whether a particular injury or illness is "compensable" or covered under workers' compensation insurance is primarily determined by state regulations. Typically, states require that in order for injuries or illnesses to be compensable, the injured or ill individual must have been engaged in work during the time the injury or illness occurred or began. Many states include "scope of the employment" language in such regulations, specifying which activities are considered part of work and which activities are outside the scope of traditional employment.
There are, of course, exceptions to the rules that cover particular injuries or illnesses. If the individuals were engaged in "horseplay" or were intoxicated at the time of the incident(s), for example, they may not be covered by workers' compensation insurance despite the injury or illness being otherwise compensable. Finally, some states carve out specific times of the day (lunch breaks) or activities (commuting) that are not within the scope of employment for the purposes of workers' compensation.
Beyond the scenarios in which injuries or illnesses occur, the types of injuries or illnesses might also impact whether the individual is eligible for compensation. Traumatic injuries are almost always covered, but "continuing" injuries or injuries that result from repetitive stress or degenerative conditions over time are more difficult to prove and ultimately, compensate.
Additionally, some states cover "psychiatric" illnesses like post-traumatic stress disorder or depression, but only if they are directly attributable to a work-related incident or injury. Finally, some states cover aggravation of preexisting injuries, but typically only to the extent that the aggravation itself undermines the employee's work, as opposed to the liability associated with the original injury.
Wage Replacement and Medical Benefits
Depending on eligibility and coverage, and depending on whether a particular injury or illness is considered "compensable," an individual may be eligible for wage replacement and/or medical benefits to address the condition. Once again, these payments and reimbursements are controlled by state-specific regulations, so it is important to be aware of the state's relevant legislation.
Wage replacement benefits are typically disbursed based on the severity of an injury or illness, how long the injury or illness is expected to limit the individual, whether the individual will have a lingering disability after he or she is able to return to work, and in severe scenarios, whether the individual has died and left behind eligible beneficiaries.
Common designations for replacement wages are as follows:
- "Temporary" benefits - Designed to expire upon the resolution of an injury or illness;
- "Permanent" benefits - Designed to compensation individuals for injuries or illnesses which are not expected to resolve;
- "Partial" benefits - Intended to replace only a portion of an individual's wages if he or she is able to return to work in a limited capacity; and
- "Total" benefits - designed to compensate individuals who are not able to return to work at all.
Depending on the designation, a combination thereof and, of course, the state where the claim is filed, individuals may be eligible for a wide range of wage replacement payments.
Medical benefits typically include reimbursement for covered treatment with approved medical providers, coverage of some or all prescription or medical device costs, vocational rehabilitation and in some cases, return-to-work programs.
In some states, individuals who require medical treatment must submit to an examination by an employer's pre-approved physician in order to be eligible for reimbursement. In other states, individuals must choose from a pool of an employer's pre-approved medical providers, and in some states, exceptions exist which allow individuals to select their own preferred medical providers.
Other states, like California, utilize an "Independent Medical Review" process to resolve disputes between medical providers that have not reached the same conclusion regarding the severity of an injury or illness, together with the individual's prognosis and schedule for returning to work.
Workers' Compensation Claims Process
Given that workers' compensation is a state-driven regulatory system, all states in the US, including Washington, D.C., will have some regulatory body or agency that manages its workers' compensation program. That agency will set the rules for various administrative functions, including:
- Filing claims for benefits;
- Responding to claims from an employer's perspective;
- Specifying the defenses an employer might use to argue against the validity of a claim;
- Appealing decisions made by the regulatory agency or court; and
- Issuing rulings on workers' compensation claims.
Each state will, of course, have its own nomenclature for the agency and its various related agencies or appeals courts, but the impact and purpose of these agencies and court systems is universal: administration of the workers' compensation program in a fair and efficient manner that serves both the state and injured or ill employees, while limiting an employer's financial liability for incidents which produce injuries or illnesses.
- Workers' compensation is an insurance program designed to:
- Replace wages and reimburse medical expenses for all individuals regardless of employment status.
- Replace wages and reimburse medical expenses for independent contractors who are injured on the job.
- Replace wages and reimburse medical expenses for contractors and supervisors who are injured on the job.
- Replace wages and reimburse medical expenses for covered employees who suffer a work-related injury or illness.
- Workers' compensation is administered by:
- States only, with no involvement at the federal level.
- States primarily, with some specific programs at the federal level depending on industry.
- The federal government primarily, with involvement at the municipality level.
- The federal government primarily, with some states administering their own claims.
- An employer's best bet to reduce its workers' compensation exposure is to:
- Take steps to prevent accidents in the workplace.
- Establish a protocol to respond to accidents in a timely and effective manner.
- Comply with its insurance provider's deadlines regarding accident notification and investigative results.
- All of the above.
- In order to determine whether a particular employer is covered by workers' compensation requirements, an individual should look to:
- His or her state's regulatory agencies, state-specific legislation and case law and federal programs.
- The National Labor Relations Board (NLRB).
- The Occupational Safety and Health Administration (OSHA).
- Federal labor laws only.
- Psychiatric illnesses or conditions and aggravation of pre-existing conditions at or due to work are:
- Always compensable.
- Never compensable.
- Potentially compensable, depending on state law.
- Potentially compensable, depending on National Labor Relations Board (NLRB) decisions.
- d. Whereas workers' compensation is a regulatory scheme designed to replace wages and reimburse medical expenses, only certain employees are eligible for these benefits, depending on several factors. Together, those factors will determine whether a particular employer is covered by the scheme, whether a particular employee is covered by the scheme, whether his or her injury is compensable as "work related," and whether the individual is eligible for benefits (and how much). Choices band care incorrect as independent contractors are a specific class of individuals who are typically not eligible for benefits, and regulatory schemes do not draw lines depending on whether an injured or ill individual is a supervisor or a contractor. Choice ais incorrect as it does not limit the pool of employees who are potentially eligible for benefits.
- b. Workers' compensation is primarily administered by state-specific agencies, regulatory bodies and dedicated court systems. There are some specific programs at the federal level that cover certain occupations or industries, but for the most part, workers' compensation is administered at the state level. Choices aand care incorrect because there are some federal programs and generally, municipalities do not administer their own workers' compensation claims. Choice dis also incorrect as it is a backwards reflection of how the system is run.
- d. There are several things an employer can do to reduce its exposure to workers' compensation claims and ultimately, payments to employees, either directly or indirectly via an insurance company. In the latter case, an employer may strive to lower its insurance premiums with providers, based on the frequency and severity of claims. Certainly employers should devote time and attention to accident prevention, given that it will result in fewer claims filed, but an employer can also reduce exposure by responding to claims in a timely and effective manner and abiding by the deadlines set by its insurance company regarding accident notification and investigation response.
- a. Employer coverage will primarily depend on state-specific legislation, state court cases interpreting that legislation and in some rare cases, the existence of industry-specific federal programs. Choice b is incorrect as the National Labor Relations Board (NLRB) hears cases pertaining to employee rights under the National Labor Relations Act (NLRA) (as opposed to workers' compensation claims), and choice dis incorrect as most of the regulations come from specific states. Choice cis incorrect as the Occupational Safety and Health Administration (OSHA) monitors employees for safety requirements and regulations, which is more about accident prevention than it is about reimbursement for lost wages and medical expenses.
- c. Psychiatric illnesses and aggravation of pre-existing conditions are two types of injuries that are receiving increased coverage at the state level. Presently, some states provide benefits to individuals with these types of injuries, and some do not. Thus, choices a and b are incorrect as they are both absolutes. Choice dis incorrect as, again, it references the National Labor Relations Board (NLRB), which is not involved in the administration of workers' compensation claims.