Workman's Compensation and Workers Compensation Laws
Workers compensation laws are crafted to ensure that employees have some form of compensation after qualifying workplace and work-related injuries. Depending on the various federal and state statutes that apply, this compensation commonly takes the form of covering lost wages and earning power, medical expenses, and/or benefits paid to dependents upon the event of an employee's death. In this way, workers compensation is sometimes viewed as comprehensive insurance for employees as the various forms of compensation equate to disability insurance, health insurance, and life insurance.
Workers Compensation Laws: Workers' Rights and Economic Efficiency
Depending on the point of view, workman's compensation is a moral obligation owed to the millions of everyday Americans who toil at their jobs to keep the country going, also known as "the working class." But workman's compensation is also a streamlined substitute for the sue-and-settle dynamic that would otherwise follow employees' on-the-job injuries. Indeed, the country's economic machine would, undoubtedly, face a huge loss of productivity associated with the time and money needed for extended litigation. Moreover, these laws actually limit workers' rights, as the statutes guarantee fixed monetary compensation in exchange for mandatory forfeiture of an employee's right to sue an employer for negligence.
Historically, many workers compensation laws were the result of decades of political tension and fighting between Big Labor and Big Business, but the compromise they struck has been an ongoing gift to the country's economic production and social justice. That said, these economic benefits rely on properly incentivizing behavior. Generally speaking, employees are not entitled to compensation from an injury that was inflicted intentionally or as the result of intoxication. Employers must pay premiums to cover the cost of workers compensation benefits, and employer's history with workplace safety will factor heavily into the cost of these premiums. There is also a counter-argument to be made, which suggests that workers compensation laws actually hurt some workers by incentivizing employers to outsource jobs where these laws are less strict.
Other Limitations to Workman's Compensation
Aside from sustaining an injury due to willful behavior or intoxication, there are other limitations to workman's compensation. While employees are entitled to compensation for lost wages due to a disability, they often receive only two-thirds of their former wages, unless they have dependents or other qualifying hardships. Even then, for a long-term or permanent disability, employees may be required to complete job retraining to retool their earning power and reduce or eliminate the need for compensation benefits. It's also worth noting that, in most cases, employees don't just forfeit their right to sue an employer. Many workers compensation laws also eliminate any liability coworkers might otherwise face for their role in the workplace injury. Finally, except for federal employees or other qualifying workers, workman's compensation is legislated and administered on the state level, where additional limitations may apply.
Employers and Workman's Compensation
Employers are required to maintain workman's compensation for their employees. Prohibited from asking employees to help cover the cost, employers must accept workers compensation insurance as part of "the cost of doing business." Often, the biggest challenge for employers is not purchasing workers compensation insurance, but mediating claims when an injury does occur. Employers may find that their insurance company is slow-rolling an employee or even unduly questioning the veracity of the claim. Since the employer is responsible for choosing the insurance company, he or she runs the risk of earning a reputation as a business that fails to take care of its employees.
While employers must maintain these benefits for their employees, they may have more options than just buying a workers compensation insurance policy. Many states provide for a self-insurance option. While this was typically only a feasible solution for very large companies, a recent trend has seen small businesses in similar industries pool their workers compensation insurance risk and manage a cost-effective self-insurance program.
Lowering the Cost of Workers Compensation Insurance
There are dozens of potential factors that will influence how much employers pay for their workers compensation insurance, but some are more important than others and more within the employers' control. First, more than the number of employees, the size of your payroll will influence costs, as lost wages is one of the most common claims that workman's compensation covers. Your specific business and industry is another huge determinant of cost. Needless to say, a manual laborer is more likely to miss work due to an ankle sprain than an office worker. But, as for things that employers can control, workplace safety is number one. Known as "experience modification," fewer workplace injuries and insurance claims, like other forms of insurance, is usually the surest way for employers to reduce their premium costs.
Workers Compensation Laws for Specific Industries
In 1906, Congress passed the first workers compensation laws to protect workers in the railroad industry. Ruled unconstitutional and reworked in 1908, this precedent-setting law was soon expanded to cover all federal employees. Passed in 1916, the Federal Employees Compensation Act continues to provide worker compensation benefits for federal employees. But as these initial workers compensation laws played themselves out, federal lawmakers saw that special rules and circumstances were needed for specific industries. Moreover, these industries were directly and substantially involved in interstate commerce, giving the federal government the necessary legal power to pass these industry-specific workers compensation laws. Today, the Federal Employment Liability Act, the Merchant Marine Act, the Longshore and Harbor Workers' Compensation Act, and the Black Lung Benefits Act explicate workers compensation laws in the railroad, marine, and mining industries, respectively.
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