Workers compensation insurance is available to employees who are injured in the course of their employment. The benefits can be either temporary or permanent, depending on the state. If the employee believes that their employer is responsible for their injury, they may sue for damages. These cases are handled by administrative law judges.
Many large employers in the United States assume financial risk for workers’ compensation. However, small businesses and sole proprietors are not required to purchase this insurance. For those companies, it is advisable to check with the state to make sure they are in compliance. Non-compliant businesses face fines of between $1,000 and $10,000. Those who fail to provide workers’ compensation coverage for two years can face misdemeanor charges or incarceration for one year.
The benefits provided by workers’ compensation are intended to cover medical costs, as well as loss of wages. But the level of benefit payments should not be so high that it discourages workers from returning to work. Some states, such as West Virginia, allow for a maximum of 70 percent of the gross wages, while other states limit the amount of temporary benefits to 400 weeks or less.
In addition to the wages they receive, workers with physical limitations that prevent them from performing their job can also receive vocational rehabilitation services. This service is provided by the Department of Labor. As with other programs, there are special rules and procedures for each state. There are special benefits for specific industries and employee groups.
Most jurisdictions have their own process for resolving disputes in workers’ compensation cases. Depending on the state, the process can be as simple as a referral to the local court system or as complex as a full hearing in front of a judge. Regardless of which option is chosen, the employee must be able to prove that his or her injury is due to the fault of the employer.
Unlike most social programs, workers’ compensation was enacted at the state level. Prior to the law’s enactment, few social welfare and insurance programs existed. During the early 1900s, workers’ compensation was considered to be the first social insurance of its kind in the U.S. A number of powerful labor unions supported the law’s sweeping changes.
During the 1970s, workers’ compensation costs increased due to reforms. Reforms sought to reduce the financial burden on employers and workers. Congress created the National Commission on State Workmen’s Compensation Laws. While the commission’s final report did not recommend federalization of the law, the commissioners did recommend that the federal government oversee the state systems.
There are a few states that have monopoly providers of workers’ compensation. Some states have a law that only allows businesses to buy their own liability insurance, and some states prohibit businesses from shopping around for the best premiums. Others require that businesses opt in to the workers’ compensation program or pay a fine for doing so.
One way an employer can comply with the law is to obtain workers’ comp insurance from a private insurer. Another way is to purchase the insurance through a state fund.