Overview: Workers' compensation is a state-controlled no-fault insurance system designed to compensate employees injured on the job and provide them with medical benefits and return-to-work initiatives, while also protecting employers from costly litigation. In most states, employers have the ability to purchase private insurance plans to guard against their workers' compensation exposure, self-insure against their exposure, or pool their resources with other employers in similar industries.
Given the detailed regulations in each state, together with the risks of exposure if employers violate state law provisions or contractual obligations with their insurance carriers, it is imperative that employers develop and maintain a robust and thorough workers' compensation policy structure. HR professionals and HR specialists have a key role in setting standards for receiving employee claims of injuries or illness on the job, corresponding with insurance carriers regarding claims, arguing against the validity of claims where applicable, corresponding with employees who are out on workers' compensation leave and working with in-house or external counsel when claims are disputed.
Trends: Some states are imposing more restrictive limitations on the types of injuries that are eligible for compensation, together with increased filing requirements and added pre-claim warnings for employers. The trend is to streamline the claims system while also reducing employers' exposure to claims and the cost of obtaining workers' compensation insurance.
Michigan, for example, passed sweeping legislation at the end of 2011 that restricts employee recovery eligibility while also imposing additional filing requirements on employees. Ohio has a pre-claim warning system that requires employees who plan to file claims for retaliation based on workers' compensation claims to notify employers in advance. California's new workers' compensation bill, set to take effect on January 1, 2013, will cut insurance costs tremendously by eliminating certain conditions from its list of compensable injuries and otherwise streamlining the claims process.
Author: Michael Jacobson, JD, Legal Editor
Updated to reflect a change in the independent contractor test under California's wage orders.
Updated to reflect US Department of Labor (DOL) regulations concerning the Longshore and Harbor Workers' Compensation Act (LHWCA).
Updated to reflect an amendment regarding claims involving mental impairment, effective July 1, 2018.
Guidance for HR on managing and complying with state workers’ compensation requirements.