Small Business Brief


A Complete Guide to Workers Compensation for Your Employees

Are you one of the 30% of business owners who aren’t sure if you need workers compensation? If you have employees, then you need to pay attention. 

If one of your employees gets injured or ill while on the job, workers comp will provide for their medical care and recovery. This will protect your business from having to cover these costs. 

Workers comp does much more than this, though. Keep reading to learn everything you need to know. 

What Is Workers’ Compensation Insurance? 

If you have an employee that becomes injured or sick while at work, your workers’ comp insurance will cover their medical and wage benefits. This type of insurance is considered a social contract between employers and their employees. 

In exchange for purchasing this coverage, business owners are protected from a lawsuit by the employees for the injuries suffered while on the job. This way, each party receives a benefit but must comply with the limitations. 

Why It Varies From State to State 

Each state has its own economy and risk profile. For example, Alaska has some of the highest premiums because there is a large lumberjack industry in the state. This is a high-risk occupation and results in significant injuries. 

Who Is Required to Have Workers Comp Insurance? 

Every state in the United States requires workers comp insurance of some form. If you have employees, you most likely need this insurance. 

There are a small number of exceptions though. You’ll need to check with your specific state to find out if you qualify for an exemption. 

Keep in mind that you need to check each state where you have employees working. The requirements may differ from state to state, and thus require you to adhere to several different standards. 

What Happens If You Don’t Have It? 

If you fail to purchase workers comp insurance and one of your employees gets hurt or sick, you will face significant expenses. First, your business will have to pay for the employee’s medical care. 

You will also have to pay fines and several penalties until you do obtain insurance. Then in some states, you could even face imprisonment. Then in other states, you could lose the right to conduct any business in the future. 

What Does It Cover?

Workers comp covers injuries and illnesses that occur while engaged in work for the business. For an employee to qualify, they would need to show that their injury is a direct result of their employment activities. 

The injury doesn’t have to be the result of an accident. For many employees, their injury is the result of long term overuse or misuse. These are repetitive stress injuries. 

Here are some examples of common claims. 

  • Chronic back pain and problems 
  • Carpal tunnel syndrome 
  • Lung disease 
  • Heart conditions 
  • Stress-related digestive issues 

More Than Medical Bills 

Expenses that relate to the diagnosis of the injury or illness are covered. This will include hospital and doctor visits. 

It also provides disability payments for those employees who are no longer able to work. Employees typically receive about two-thirds of their salary. 

In some instances, workers comp will pay for rehabilitation or retraining. 

What Does It Not Cover? 

Certain activities won’t be covered by workers compensation. These are determined by state law, so you’ll need to confirm what your policy covers specifically. 

In general, here are some things that are not covered by workers compensation. 

  • Emotional injuries not accompanied by physical trauma 
  • Injuries suffered while the employee was intoxicated 
  • Injuries the employee suffered intentionally 
  • Injuries from an employee-instigated altercation  

Not All Employees Are Covered 

Each state excludes specific types of employees from workers compensation coverage. The list of excluded employees can vary from state to state, but there are some common positions that every state excludes. 

Employees that are farmworkers, seasonal, casual, or domestic are typically excluded from coverage.  

There Are Doctor Restrictions 

Each state has rules that outline how employees must seek medical care. For some states, employees can choose to see their own doctor. 

For other states, employees must elect for this option before the injury happens. Then in other states, the injured employee must go to the employer chosen doctor. 

This is significant because it is this doctor’s report that will have a significant impact on the benefits that the employee receives. 

How Does It Protect Your Business?

There are three primary ways that workers compensation insurance can protect your business. First, this insurance helps cover the costs of employee work-related injuries and illness. 

Then it mitigates the possibility that your injured employee will bring a lawsuit against your business. Finally, it keeps your business in legal compliance with state regulations and code. 

Your Employee Can Still Sue 

You are not entirely protected from a lawsuit with workers compensation. As a general rule, employees cannot sue for pain and suffering or mental anguish.

Some states due allow employees to sue in certain circumstances. If the employee didn’t have adequate workers comp at the time of the accident. Employees can also sue if the employer intentionally put the employee at risk. 

If you have an injured employee making a claim against your business, then you need to consult with a personal injury law firm. Having a knowledgable legal team will be your best defense against these types of claims. 

Get Workers Compensation Today

By now, you should have a clear understanding of what workers compensation is and why you need it. Now is the perfect time to start shopping around and obtain coverage for your employees.  

When you have workers compensation insurance, you protect both your business and your employees. 

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