In our last blog, we examined the benefits—and legal requirements—of ensuring a safe workplace.
However, like most things in life, safety is not always a 100 percent certainty, and even employers who have done all the right things to ensure a safe work environment can be faced with the prospect of an employee injured on the job.
Understanding that reality is the reason behind the existence of workers compensation.
Administered under state laws to all but federal employees and those working in a few selected high-risk industries, workers compensation is a legally binding system under which employers either pay directly—or far more often, through the purchase of workers compensation insurance—for the medical care, death, disability or rehabilitation benefits of employees injured or killed while on the job.
First instituted in the U.S. in 1911, initially in the state of Wisconsin, workers compensation has grown to become an integral part of doing business in the United States. Under the ‘no-fault’ system, employers purchase workers compensation insurance so that in the event that an employee is injured while at work, benefits can be paid out (by a third party) to cover his or her work-related injuries.
In the past, many states instituted agencies that oversaw monopolized, state-run workers compensation systems; more recently, many states—such as Nevada—privatized their workers compensation agencies, thereby allowing employers to shop around for workers compensation insurance in much the same way they would any other form of insurance. These days, only five states and two U.S. territories (North Dakota, Ohio, Puerto Rico, the U.S. Virgin Islands, Washington, West Virginia, or Wyoming) require employers to purchase workers compensation coverage exclusively through state-run funds.
One of the biggest challenges for companies operating in more than one state is the fact that each state has a very unique set of regulations governing the purchase of workers compensation. Even the question as to who is—or isn’t—covered by workers compensation can differ from state to state; for example, some states require commission-only employees to be covered, others do not.
The good news, however, for employers is that while it’s a mandatory cost of doing business–workers compensation insurance policies almost always limit the direct liability of an employer; once the policy has taken effect, an employer’s liability for the worker’s injury is covered by the insurer.
As with the purchase of any insurance, the cost of buying workers compensation insurance can be mitigated with a few smart actions:
Maintain a safe workplace; insurance companies often reward businesses with a safe workplace history with lower insurance premiums
Explore alternatives to traditional workers compensation companies; many trade industries sponsor workers compensation programs at reduced costs to members
Promote safety among both workers and managers; companies that promote workplace safety—often with incentives—can end up saving money on their workers compensation insurance for years to come
Do your ‘due diligence’ on the risks involved in conducting your type of business; by examining data through the multitude of workers compensation resources available, employers can take steps to better mitigate the risks of any employee injuries, and thereby lower workers compensation costs.
Workers compensation insurance is part of the reality of doing business in Modern Day America.
However, as noted in our last blog post, conscientious employers who proactively take precautions to ensure a safe workplace environment can—and will—mitigate that cost, while also providing workers the reassurance that their employer cares about their workplace safety.