Workers' compensation (colloquially known as workers' comp or workman's comp) 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 dependants 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 union. Supporters of such programs believe they improve working conditions and provide an economic safety net for employees. Conversely, these programs are often criticized 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.
Statutory Coverage:
At the turn of the 19th century workers’ compensation laws were voluntary for a couple of reasons. Specifically, an elective law made passage easier and many felt that compulsory workers’ compensation laws would violate the 14th amendment due process clause of the U.S. Constitution. Since workers’ compensation mandated benefits without regard to fault or negligence, many felt that compulsory participation would deprive the employer of property without due process. The issue of due process was resolved by the United States Supreme Court in 1917 when in New York Central Railway Co. v. White it was held that an employer’s constitutional rights weren't affected. After the ruling most states enacted new compulsory workers’ compensation laws.
In 1855, Georgia and Alabama passed Employer Liability Acts; 26 other states passed similar acts from 1855 - 1907. These acts simply permitted injured employees to sue the employer and then prove a negligent act or omission.
After Germany's 1884 Act, workers' compensation laws began to be reformed to reduce the need for litigation, and to mitigate the requirement that injured workers prove their injuries were their employer's "fault". For example, The 1897 British Act replaced the 1880 Act.
In the United States, the first state such worker's compensation 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. Texas employers have the unique ability to opt out of the Workers' Compensation system under the original state law written in 1913. However, those employers, known as non-subscribers, still need insurance coverage in the event of workplace injury. This then is how the non-subscription industry in Texas began.
Non-subscription has proven to be a highly successful free market alternative to the government run workers' compensation system in Texas. Over 40% of Texas employers are nonsubscribers, including many of the state's larger and better known employers such as the H-E-B Grocery Company. Historically, these employers have had significantly greater satisfaction ratings and reduced expenses when compared to the workers’ compensation system.
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. 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.
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. Such evidence may not be admissible at a trial, if it is found that the taping infringed on the employees' reasonable expectation of privacy.
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.
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. 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.
Statutory Compensation in New York State:
Workers' compensation is required by law for business owners to have in place for their employees. 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. Owners of for-profit corporations are exempt from workers compensation insurance however non-profit companies do not get the exclusion.
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 on actions an employer can do to "manage" the processes in the workplace immediately after an injury occurs. There are four stages to the workers' compensation 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' compensation laws or eliminate plaintiff's lawyers or the legal system, items that are frequently mentioned as "causes" of high workers' compensation 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. Often 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.
In the United States, there has developed a relatively small industry of cost control consultants who review Workers' Compensation insurance premium charges for employers in order to find and correct overcharges caused by technical errors by insurers. These consultants typically review classification codes, payroll audits, and experience modification factor calculations. These consultants reduce Workers' Compensation costs by correcting errors in insurance premium calculations, rather than by reducing claims costs.
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 2009, according to the 2009 RIMS Benchmarking Survey is $721 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
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