Basics of Workers’ Compensation*

This week’s Toolkit Topic begins a series of weekly discussions on workers’ compensation-related issues.  "Workers' compensation" refers to a system of laws outlining specific benefits to which injured employees are entitled, and the procedure for obtaining such benefits.  Every state has its own workers' compensation laws. Workers' compensation laws vary from state to state. 

For example, in Illinois, every business must have some form of workers' compensation insurance to cover injured employees or demonstrate that they are self-insured and that they have the financial resources to cover any reasonably anticipated claim. Employers who are noncompliant with the applicable workers’ compensation statutes are subject to a number of civil and criminal penalties.  Moreover, a noncompliant employer generally loses the statutory protections of the applicable workers’ compensation law, allowing the employee to pursue unlimited personal injury damages in civil court. Workers' compensation laws are designed to ensure that employees who are injured on the job receive fixed monetary awards, without having to litigate their claims against their employers. In this way, workers' compensation is an important safety net for employees when they are injured on the job.

When an employee is accidentally injured on the job, the employer or insurance company pays for the medical care, lost wages and for rehabilitation and training due to the injury, regardless of fault. No part or the premium or benefits can be charged to the employee. Thus, even if an employee is responsible for his or her own accidental injury, the employee is covered by workers' compensation under most circumstances, as long as the injury happened on the job.

It is important to note, however, that workers' compensation is an injured worker's "exclusive remedy" with respect to a work-related injury, unless he or she can point to a third party who contributed to his or her injuries. For example, because products or machinery used at work can often injure workers, they may, and often do, seek compensation from the manufacturers of such products or machinery, in addition to seeking workers’ compensation benefits from the employer’s workers compensation insurance carrier.

Generally excluded from coverage under the Act are sole proprietors, corporate officers who have opted out of coverage, independent contractors and volunteers. However, care must be taken with respect to workers classified as independent contractors since many state agencies throughout the country utilize worker classification tests that increase the likelihood that an independent contractor will be deemed an employee and therefore entitled to workers’ compensation benefits under applicable law. 

Next week, we will discuss in more detail employer responsibilities under the Illinois Workers’ Compensation Act.   

* This is one of a series of weekly articles containing helpful tips and “best practices” for employers to keep in mind when managing their workforce.  These articles are partially adapted from my book, Employment Law Toolkit for Employers.  If you would like a copy of my book, please reach out to me at 312-876-6676 or jason.tremblay@saul.com. Nothing contained in this article shall be construed as legal advice and this article does not create an attorney-client relationship between Saul Ewing LLP and any reader.