The purpose of workers' compensation law is to provide compensation to employees for work related injuries, except for some willful or self-inflicted injuries, without regard to fault.
Under workers' compensation laws, as they began to develop from state to state, the requirement of proof of fault by the employer and the availability of employer defenses were eliminated. In essence, an employer was held strictly liable when the following three criteria were met:
- 1. The injury or disease arose out of, and in the course of, employment.
2. The employment is of the type not otherwise excluded by the statute; and
3. The employee did, in fact, suffer a personal injury or disease.
Where these elements are shown, the employer becomes strictly liable for the employee's injuries. In turn, with this strict liability, the employee gives up the opportunity to pursue negligence or other types of legal claims against the employer. The statutory right to receive workers' compensation then becomes the exclusive remedy which the employee has against the employer. Other types of legal claims may not be raised against the employer for the injury.
Workers' compensation provides payment for the injury or disability, both temporary and permanent, for death benefits and for rehabilitation expenses where appropriate, medical expenses which arise out of the injury and for income which is lost during the period of time during which the injury heals. It should be noted that self-inflicted injuries or injuries caused by willful acts of third parties are typically not covered under a state workers' compensation statute. Any redress for these injuries is left to the legal system through independent claims.
State workers' compensation laws. Our workers' compensation systems have evolved on a state-by-state basis over the past 75 years. Each state has their own unique legislation and an employer who does business in several different states should be conscious of the nuances and differences between state laws. Nonetheless, the basic elements of the workers' compensation systems in each state are quite similar. For purposes of this chapter, a general overview of workers' compensation law is provided. The cautious employer will check the provisions of the law in each state in which the employer does business and seek advice of competent counsel before making workers' compensation related decisions.
Workers' compensation coverage is typically required from all employers. An employer may decide to self-insure its program or could work through a private insurance carrier. In many states, an employer who fails to obtain proper insurance will still be held liable for any injuries to workers which arise out of, and in the course of, employment.
Employees. Who is an "employee" entitled to workers' compensation coverage? Under most circumstances, it is fairly easy to determine when an individual is an employee entitled to benefits for work-related injuries. Where a business directs the work performance of an individual and provides compensation and benefits, employment status is clearly visible. However, many workers' compensation statutes contain exemptions for certain types of employees. Farm workers and domestics are often times excluded from the definition of employee in many workers' compensation statutes. In addition, temporary employees or contract employees may also be exempted from the exclusivity provisions of the workers' compensation statute as they are considered employees of an independent contractor, not the business which retains the contractor. It is, however, possible that a situation could arise in which both entities may be found to be the "employer". In addition, an injured employee may sue a third party and the third party could file an action against the employer based upon the alleged breach of an independent duty owed by the employer to the third party.1
Independent contractors. Independent contractors are deemed to be the employer of their employees. As a consequence, a company which assigns work to an independent contractor business is typically not held liable for workers' compensation injuries in the event the individuals employed by the contractor are injured. As a general rule, it is recommended that a business utilizing an independent contractor seek some evidence that the independent contractor has workers' compensation coverage for its employees. Usually a Certificate of Insurance is adequate evidence of such coverage.
Employer responsibilities and duties. In addition to the employer's "strict" responsibility for providing some reimbursement for medical expenses and loss of pay resulting from an employee injury, the employer also has many other administrative and ministerial functions to perform under a typical state workers' compensation system. Generally, an employee is required to give the employer notice of any injury incurred within a specified period of time after occurrence of the injury. Typically, a form is made available to employees for completing reports on injuries. The employer must then, in turn, file a report of injury with the state Industrial Commissioner or a comparable agency. This report permits the workers' compensation agency to monitor the number and status of claims for work-related injuries filed against employers in the state.
Cooperation with the insurer. The employer must also coordinate and cooperate with its private insurer (if applicable) to see to it that the employee's claim is appropriately handled in accordance with the provisions of the state workers' compensation statute. In cooperating with a private insurer, ordinarily the amount of workers' compensation disability payments owed by the employer turns upon the ability of the employee to return to work in a gainful capacity. As a consequence, insurers and employers work hand-in-hand in evaluating the employee's extent of disability, the employee's remaining skills and abilities, and the availability of positions to which the employee can return to gainful employment. Whether the employer has an established "light duty" program or simply looks for opportunities to make work available to the injured employee, the employer will receive pressure from the insurer to return the employee to productive work as soon as possible.
Generally, an employer has the right to choose the care provider for the injured employee. The care to be provided must, of course, be appropriately suited to treat the injury in question. Many times, workers' compensation statutes provide the worker with an opportunity to request an alternative care provider if the worker is dissatisfied with the employer's choice.
Contests over injuries. When there is a disagreement about the amounts due for an injury, most statutes provide for an administrative procedure to resolve such disputes. Often times, a contested case petition is prepared and filed with the administrative agency. Thereafter, an administrative hearing officer or law judge is assigned to the dispute and the parties are provided opportunities for appeal and review, even to the highest court in the state.
Benefits provided under workers' compensation statutes. There are a variety of different types of benefits which are made available to workers who have been injured in the course of their employment. The benefits made available depend upon the nature of the employee's injury, the duration expected for the injury, and the apparent permanency of the injury. Initially, the employee may be eligible for compensation which is roughly two-thirds to eighty percent of the employee's current earnings. As a general rule, workers' compensation benefits are tax free and the paid percentage is designed to provide the employee with interim earnings while recovery is ongoing prior to the employee's return to work.
An injured worker is also entitled to receive the amount of medical benefits paid for injuries. Medical benefits may include medical services, prosthetic devices, dental services, nursing services, hospital services, and even reasonable transportation costs incurred.
Classification of injuries. Injuries incurred by workers are usually classified based upon the nature and extent of the disability. As an example, the state statute may use the term "temporary disability" where it is anticipated that the worker will return to work without any permanent disability. A "permanent" disability describes a circumstance where the injured worker has incurred a disability which will remain with the individual for the rest of their life. If the worker's condition has stabilized and the injury is such that it will not improve, the worker may be entitled to permanent disability payments. For temporary disabilities, an injured employee may be entitled to a "total" temporary disability payment when the worker is simply unable to perform the duties which were assigned before the injury. By way of contrast, a temporary, partial disability may exist when an injured employee can perform some labor but not in the same capacity as before the injury. Finally, a term such as "healing period" may be used in a statute when a worker has some type of permanent disability. Compensation is normally paid during the healing period until the worker's healing and improvement is completed.
Permanent and scheduled injuries. When an employee has suffered from a permanent disability, workers' compensation statutes typically attempt to assign a formula to the injury and body part affected to compensate the employee for the permanent disability. Often the formula calculation is based upon the AMA Guidelines to Physical Impairment (3rd Revised Edition) which is consulted by a treating physician to determine the extent of physical impairment. Industrial disability benefits are ultimately assigned based upon a formula designed to compensate an employee for loss of earning ability. Many times there is a cap upon the number of weeks of disability benefits to which the injured employee is entitled. In addition to the statutory formula designed for a calculation of benefits, many workers' compensation statutes also feature lists of what are called "scheduled injuries" with the amount of compensation to be provided for each injury. Scheduled injuries are simply a listing of injuries (i.e., loss of a thumb, first finger, etc.) with the number of weeks of compensation to which the employee is entitled as a result of the injury (i.e., 25 weeks, 30 weeks, etc.). Through utilization of these scheduled lists, workers' compensation statutes have sought to simplify the process of calculating the employer's exposure for disability benefits.
Subrogation: Recovering workers' compensation payments. In some instances, an insurance carrier or an employer may have a right to recover monies paid to an injured worker under a workers' compensation statute. Where a third party could conceivably be responsible for the employee's injury, there may exist a right of "subrogation" under the state statute. In this instance, the employer or insurer is entitled to seek some reimbursement for workers' compensation paid to an employee where a third party is responsible for the injuries incurred by the employee.
Discrimination against insured workers. Many states prohibit an employer from discriminating or retaliating against an injured worker who has sought workers' compensation benefits. Through an express provision in the workers' compensation statute or through judicially determined rules under common law, most states are quick to provide legal claims against employers who attempt to interfere with an injured worker's right to seek workers' compensation. The downside financial risk for this type of employer shenanigan can be substantial and expensive.
HELPFUL HINTS FOR MINIMIZING WORKERS' COMPENSATION PAYOUTS
In addition to avoiding retaliatory action against an injured employee, most employers can take a number of other steps to help them minimize their exposure for workers' compensation payments. Some of the "tips" which could conceivably benefit an employer by holding down workers' compensation-related costs are the following:
- 1. Recognize that workers' compensation law is designed to help and protect the injured worker. The laws are biased in favor of the worker and an employer's anger or chagrin over the employee's injury will not alter the law.
2. Communicate with the employee about his/her injury and the prognosis for recovery. Most employers will have at least weekly contact with the employee in an effort to monitor recovery and to encourage the employee's recovery and return to work.
3. Provide position descriptions and detailed information to treating physicians to enable them to make sound assessments concerning the employee's ability to return to gainful employment. Further, for purposes of reasonable accommodation under disability statutes, employers are well served by providing the employee's treating physician with adequate information concerning the employee's assigned job responsibilities. A medical doctor may not precisely understand what the job duty "construction labor" means for your business. Specific information should be provided about the daily activities performed by the injured employee.
4. Seek assistance from outside industrial rehabilitation consultants or clinics to get further information concerning the employee's prognosis for recovery and functional capacity in various types of assigned positions.
5. Provide "light duty" positions if appropriate. No employer is under an obligation to create a separate class of "light duty" jobs, but the availability of such work can produce a "win-win" situation. The employee returns to gainful employment, the employer receives some benefit from the employee's productive efforts and also reduces workers' compensation liability, and in some instances, the employer may also satisfy the obligation for "reasonable accommodation" under applicable disability discrimination statutes.
Workers' compensation claims can be extremely expensive and frustrating for many employers. Still, the intended purpose behind state workers' compensation statutes is recognized as beneficial and necessary for injured employees. Rather than fighting the system, a wise employer will implement a well engineered program for administering workers' compensation claims, working with a competent insurer and competent medical and rehabilitation experts for moving employees back into gainful employment, and will seek competent legal counsel where necessary.
SOURCES
- Ipalco vs. Abild Construction Co., 144 NW 2d 303 (Iowa 1966).