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What Is Workers' Compensation? - Laws and Purpose

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  • 0:06 Injured on the Job
  • 1:26 Workers' Compensation
  • 3:29 Purpose of Workers'…
  • 5:30 Federal Workers' Compensation
  • 6:49 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

Workers' compensation laws require insurance protection for people who are injured or become ill due to job requirements. These laws are designed to provide these disabled employees with fixed monetary awards and avoid litigation. This lesson explains workers' compensation.

Injured on the Job

Karen works as a groundskeeper at the San Diego Zoo. It's her dream job because she loves to be outside and she loves animals. As part of her job, she's required to go into the aviary to sweep bird poop and clean up after the people who've been inside to see and feed the birds.

But yesterday she was involved in an accident. A large parrot mistook her hair bow for an enemy bird. The parrot swooped down and attacked her head. Karen suffered a concussion and had to get 12 stitches in her head. The doctor said she'd be off work for at least six weeks.

Karen doesn't have that much sick leave built up because she hasn't worked at the zoo very long. She's worried about missing work and not getting a paycheck. Today her boss left her a message. He was checking on how she was feeling and told her to call Tim in the human resources department when she got a chance. He said that Tim would help her with her workers' compensation claim form and then she should start receiving her payments. Karen is curious to find out what this is! Karen didn't know she had workers' compensation, but this is a relief.

Workers' Compensation

The San Diego Zoo, like all employers, is required by law to carry workers' compensation insurance. Workers' compensation refers to the laws that require employers to carry insurance in order to protect employees who are injured or become ill due to their job requirements. In some instances, workers' compensation can also pay benefits to a worker's family when that worker suffers a long-term disability or is killed while on the job.

The important thing to note is that the injury or illness must be work-related. If the employee was doing something for the benefit of the employer and was injured or became ill as a result, then the employee will be entitled to workers' compensation benefits. This can even include making a delivery off the company's premises, if the delivery is part of the employee's job.

In general, workers' compensation won't include injuries during lunch breaks, company picnics, or events or travel. It doesn't typically cover a preexisting condition or any kind of employee misconduct. Worker's compensation covers most work-related falls or other accidents that cause a physical injury, such as Karen's accident. Note that it also covers work-related illnesses.

One example is mesothelioma, which is a type of cancer commonly caused by exposure to asbestos. Most people with mesothelioma have worked in jobs where they have accidentally inhaled asbestos fibers. For this reason, the use of asbestos is now outlawed in the U.S. But mesothelioma sometimes takes decades to develop, so many people continue to be diagnosed with this work-related illness.

Purpose of Workers' Compensation

Because workers' compensation laws are state laws, the laws vary from state to state. Each state decides for itself:

  • The employers' responsibilities to workers;
  • The types of injuries and illnesses that are covered; and
  • The types of awards that the injured employee might receive.

However, all state laws are similar and share common goals that are rooted in public policy. All workers' compensation laws are designed to provide injured employees with fixed monetary awards and to do this without litigation. In most cases, injured employees like Karen can collect compensation fairly quickly and with few paperwork requirements. Most employees find this to be more desirable than hiring an attorney, initiating litigation, negotiating a settlement, or perhaps waiting years for a trial.

Both employees and employers can save time and money by handling the matter outside of court. For employers like the zoo, workers' compensation provides the added benefit of limiting the amount an injured employee like Karen can recover from the employer.

Let's take a look at the benefit to Karen. Worker's compensation will cover Karen's medical expenses, but the insurance program is also designed to prevent Karen from losing income. Karen may be able to receive up to two-thirds of her regular salary until she's able to return to work.

Let's say that Karen's concussion causes her to suffer sensitivity to bright light. This is a long-term consequence that may never go away. As a result, she needs to switch to an indoor job. Workers' compensation may pay for Karen to undergo job training for a comparable job, so that she can change to one that accommodates her situation.

Federal Workers' Compensation

Now let's take a moment to look at federal workers' compensation statutes. Not all workers' compensation laws are state laws, though the majority are state laws. The federal workers' compensation statutes only apply to federal employees or those workers employed in some significant aspect of interstate commerce.

The main federal law that deals with workers' compensation is the Federal Employment Compensation Act, or FECA. This law provides workers' compensation for non-military, federal employees. It's similar to most state workers' compensation laws, though FECA is limited to work-related disability or death only.

FECA covers a disabled employee's medical expenses and provides two-thirds of his or her normal monthly salary during the period the disabled employee is unable to work. The employee can receive larger monthly payments if he or she suffered permanent physical injuries, or needs to provide for dependents. FECA also provides compensation for family members of federal employees who are killed during work-related activities.

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