Definition
A state-mandated insurance programme that provides medical benefits and wage replacement to employees who are injured or become ill as a direct result of their job, in exchange for the employee relinquishing the right to sue the employer for negligence.
UK Context
Best Practices
- Report workplace injuries promptly to your insurance carrier — most states require first reports within 24-72 hours
- Establish a return-to-work programme with light-duty options to reduce claim duration and costs
- Maintain a strong safety programme to reduce injuries and improve your experience modification rate
- Classify employees under the correct workers' compensation codes to ensure accurate premium calculations
Frequently Asked Questions
Is workers' compensation required in every state?
Nearly all states require workers' compensation coverage, though requirements vary. Texas allows private employers to opt out. Most states require coverage once an employer has one employee, while a few states set higher thresholds. Check your state's specific requirements.
Can an employee sue their employer if they receive workers' compensation?
Generally no — the exclusive remedy doctrine means workers' compensation is the employee's sole remedy for workplace injuries. Exceptions exist for intentional employer misconduct, third-party claims, and in some states for gross negligence. Texas employers who opt out of workers' compensation can be sued by employees.
How are workers' compensation premiums calculated?
Premiums are based on three factors: the employer's industry classification code (which determines the base rate per $100 of payroll), total payroll, and the experience modification rate (a multiplier based on the employer's claims history). Employers with fewer claims pay less.