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Journalists Resource Center For Workers' CompensationWorkers’ Compensation – General Information Index Workers’ Compensation Facts and Figures
History of Workers’ Compensation Workers' Compensation is a no-fault system of social legislation, first instituted in the United States shortly after the turn of the century, in response to serious societal problems caused by a dramatic rise in the number of people injured in industrial settings. Prior to the enactment of workers comp laws (called workmens' compensation or workmans’ compensation in earlier days) the only means for an injured worker to recover any compensation to pay for medical expenses and loss of employment income, was to hire a lawyer and prove negligence or malice on the part of the employer. Of course, it was rare for an employee to even have enough money or knowledge to hire a lawyer in the first place, and then proving negligence was as difficult then as it is now. In most cases, the injury was not the fault of the worker or the employee – there were a lot of dangerous jobs in those days, and most accidents were simply accidents. Even if the injured worker's lawyer was able to establish negligence on the part of the employer or another party, which was often not the case, the road to recovery was drawn out and expensive, and an employee might well lose his/her home, health and family waiting for relief. Supporting a large number of indigent, injured workers became a drain upon society. State legislatures across the United States began to propose the adoption of workers comp laws designed to withdraw law suits against employers from the Court system, and to provide some measure of swift compensation to the injured worker, regardless of fault. The first state law was passed in Wisconsin in 1911. By 1948, all states had enacted some kind of workers' compensation law. Each state enacts its own set of workers’ compensation laws, and there is no Federal control over individual states’ workers comp laws. This makes it complicated for workers who experience a workplace injury, for employers who have employees in multiple states, and for insurance carriers who must abide by different laws and rules in each state. Because the rules are not particularly straightforward, it is almost always advisable that an injured worker retain an attorney to ensure his rights and maximize his award. Some states have taken the step of limiting the fees an attorney may charge when pursuing a Workers’ Compensation claim on behalf of an injured worker. Other states allow attorney’s fees as high as 40% of the value of the claim. The Actual Purpose of Workers’ Compensation In the United States most employees who are injured on the job have an absolute right to medical care for that injury, and in many cases monetary payments to compensate for resulting temporary or permanent disabilities. Unfortunately injuries do occur quite often in the course of employment, and some of these injuries are very serious and life-altering. Some even result in death. The primary goal of the system is to get the employee back to work, even in a limited capacity, as quickly as possible. If the employee is seriously disabled and cannot return to work, the intent of the law is to cover the employee’s medical expenses and to provide replacement wages so that the employee does not become indigent and a burden on the state. Some injured workers have a misconception that a workplace injury is a ticket to financial independence, which is not the intent of the law. Employers Must Carry Insurance Most employers are required to carry workers' compensation insurance, and in most states employers risk heavy financial penalties if they fail to carry the insurance. 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, it can obtain coverage through an assigned-risk program. Large employers may save money by being self-insured. Each state has solvency requirements for self-insured employers. About 20% of all employees in the United States work for employers who are self-insured. 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. The largest state fund is California's State Compensation Insurance Fund. The federal government pays its workers' compensation obligations for its own employees through Congressional budget appropriations. No Retribution for Filing a Claim It is illegal in some states (although not in others) for an employer to terminate an employee for reporting a workplace injury or for filing a workers' compensation claim. Most states also prohibit refusing employment for having previously filed a workers' compensation claim. It is of course illegal to falsely claim workers' compensation benefits. Some employers hire private investigators to videotape claimants surreptitiously; some of these videos have shown employees engaging in sports or other strenuous physical activity despite disability. Almost every day throughout the United States, someone is convicted of collecting on a fraudulent claim. After an injury occurs, the Insurance Carrier appoints a Claims Administrator who has the authority to oversee the course of medical treatment and the distribution of payments to the injured worker. There is a tension built into the relationship between the worker who is legitimately injured and the insurance carrier who must pay the medical bills and other compensation. Assuming no fraud or malice on either side, the injured worker wants quality medical treatment to enable a full recovery, and the insurance carrier wants to reach that goal as inexpensively as possible within the law. Disputes arise when the Claims Administrator contests employee claims, and conversely, injured employees often feel they have been treated unfairly by the Claims Administrator. Most claims are handled smoothly, but even so many Workers’ Compensation cases end up in court. In the vast majority of states, Workers' Compensation disputes begin with a special state administrative agency that hears the facts of the case and makes a ruling on what benefits should and should not be paid. Either the injured worker or the Employer / Insurance Carrier may appeal the agency’s decision, and this is typically handled first through an appeals board, and then finally in the state court system if there is no resolution. Often when the court decides against the original ruling of the state agency, they will remand the case back to the agency for reconsideration. |
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