Workers’ compensation can be defined as a term of insurance coverage that covers medical care as well as monetary benefits for employees who sustain injuries in the process of performing their employment responsibilities. This form of insurance gives employees the right to sue their employers if they feel that the injuries sustained are a result of the employer’s negligence. This kind of suit is known as the tort of negligence. The compensation bargain plan is determined by the jurisdiction and it differs from one state to another.
A compensation bargain is a trade-off between the employer and the employee that ensure that both parties do not lose. Examples of workers’ compensation include disability insurance, health insurance, and life insurance. Disability insurance can be in the form of weakly payments instead of wages. Medical fees reimbursement is a form of health insurance where the plaintiff is refunded all the money spent in accessing medical care or if not paid, the company is required to pay the medical bills. Life insurance occurs in the form of benefits (either in money or kind) that are given to the dependants if workers meet their untimely death during employment. Other forms of damage such as pain and anguish are not included in the workers’ compensation plans and are termed as minor for the worker to be able to meet them (Burton 2)
Workers’ compensation plans are only available in some of the developed nations (such as the United States of America, the United Kingdom, and Australia) and have been established after long periods of struggles by the trade unions in respective countries. Research has found that these compensation plans not only boost the morale of workers but have also led to significant improvement in the working environment. Employers have been forced to provide safe and secure working conditions if they have to prove their innocence in case they are sued in a court of law. However, these laws have been criticized as denying employers some of their rights against the tort of negligence by the government and the insurance companies who seek to reduce their economic responsibility.
Before the introduction of the compensation plans, employees could only follow their compensation through civil law. In most cases, these laws favored employers as the civil law still held the view of master-servant kind of employment. Employers were seen as superior to their employees and any employee with a claim against his employer was required to prove beyond any reasonable doubt that his injuries were a result of the employer’s negligence. This paper will give an in-depth analysis of statutory compensation law, give an example of workers’ compensation cost control that can be adopted by employers, compare workers’ compensation laws used in different states and give some the benefits of workers’ compensation plans to both the employer and the employee.
Statutory compensation law
Statutory compensation law benefits both employers and employees. A compensation plan is normally drafted showing the kind of injuries that an employee can be compensated for and the amount of compensation that he is entitled to. As seen earlier, not all injuries are compensated under the statutory law, and therefore every employee is required to prove that he was injured at the workplace. Statutory compensations are based on an employee’s ability to acquire job placement under his condition, for example, an employee who has lost one leg or an arm can be able to find partial employment. However, this does not include the difficulties encountered in the process of looking for employment because of an employee’s disability.
Statutory compensation law may require employers to put the injured employees on light duties, however, if no light duties exist, the employer has the right to suck the employees based on poor performance. If other forms of injuries are discovered in the workplace such as stress, strain, or depression, the law does not provide any form of compensation and forces the employer and employee to seek help from the courts (Anon. 4) Normally, in cases of permanent disabilities such as incapacitated spinal code, the law does not provide full compensation to cater for the victim wellbeing for the rest of his life. In most cases, the amount compensated is by far below the required amount to ensure that the worker lives in a good condition.
In preparing the compensation schedules, the court normally considers the type of damage and the type of profession. For example, the loss of a leg may interfere with an accountant’s performance but it can entirely devastate the profession of an artist. Parties involved in workers’ compensation include although not limited to employers, injured workers, insurers, state officials, and the medical community. An example of an employee compensation schedule is shown in the appendices (table 1). However, the relative importance of this compensation varies from one party to the other and normally conflicts arise among these parties as they try to ascertain the best public policy to fit in workers compensation programs (Department of labor and workforce development 1)
The national commission of worker’s compensation laws recognized adequacy of cash benefits as one of its major objectives in its workers’ compensation program.
The general objective, that “workers” compensation should provide substantial protection against interruption of income, was translated by the national commission into 27 specific recommendations. One use of the specific recommendation was to provide a basis for assessing the adequacy of state workers’ compensation benefits as of 1972 (Thomason 9).
The National Commission observed that the workers’ compensation should be more than sixty-five percent of the weak wage rate as of 1972. By 1973, the weekly compensation wage rate was increased to 100% although not many companies had adopted the program.
Workers’ compensation cost control
Worker’s compensation can not be termed as a cost of doing business and all employers / or managers should do everything that is within their powers to reduce such cost. These costs are normally liabilities to a business and not only do they lower a business’s profit margin but also deprive it of some of the best employees. All employees should ensure that the working condition in as stipulated by the law to minimize the cases of injuries. OSHA requires employers to provide a safe working condition which includes employee pieces of training on emergence preparedness. This is because some injuries sustained by employees are a result of a lack of proper procedure or measures to use in times of disasters, for example, theft or fire. Emergency preparedness program is aimed at equipping personnel on important skills to be used in times of emergencies (Thomason 20). All employees should be trained regardless of their position and some should be held responsible for performing some critical operations before evacuating. These operations include shutting down machines in cases of fire to reduce them from spreading to sensitive areas.
Other procedures to be followed in workers’ compensation cost control include, but are not limited to cost drivers and policies. Certain areas can be considered as key cost drivers which include training of managers and supervisors, coordination of medical care, implementation of an intermediary duty program, improving employer-employee relationships, establishing fraud and abuse among others. Compensation cost control should be a holistic approach covering the whole problem rather than concentrating on the reduction of medical bills. Employers should focus on the procedures that are within their control other than concentrating on procedures that are far beyond their jurisdiction such as statutory compensation laws. They should understand that they can never change compensation laws nor can they do away with the plaintiff’s lawyers, but they can establish an injury reaction procedure that specifies what an employee is supposed to do if injured.
Injured employees should be given medical attention as soon as possible before it becomes difficult to treat. This will reduce worker’s compensation costs for the employer and also benefit the employee by quickening his recovery. If a claimant’s case costs the employer a significant amount of money, after-action reviews should be carried out to assess the reasons behind such high costs and to prevent the same from occurring in the future.
The other compensation cost control is policies. Every employer should have reliable policies and forms to help in controlling the overall process. All companies, no matter the size, should have taut post-injury procedures to assist the management team in controlling the post-injury process. The goal of most employers is for any injured employee to be able to resume duties within a period of one to four days after the day of the injury unless he has been incapacitated and might not be able to perform his duties. However, the time that the employee is absent from work should be in proportion to the span of the disability ((Thomason 30). As of 2009, the average cost for all employees was 721 dollars. Some of the policies that can be used include vocation ability form, employee brochure, employee acknowledge form, post-injury processes, employees’ introduction letter, as well as employee acknowledgment form (Guyton 10).
Workers compensation in the United States
Before the 19th century, workers’ compensation laws were not compulsory in many states. Many people felt that, if the workers’ compensation laws were made compulsory, they would vote lent the 14th amendment section in the U.S. constitution. This was because workers’ compensation required employers to compensate their injured employees even without negligence. This would have deprived employers of their rights to their property without valid reasons (AFL-CIO 3). However, this issue was resolved in 1917 by the Supreme Court in the United States and was enacted as law. Other states followed suit afterward.
It was first passed in Maryland in 1902 and by 1949 all almost all states had already adopted the law. It was first known as “workman’s compensation” but for gender sensitiveness, most jurisdictions decided to adopt the term “workers’ compensation”. In the United State, all employees injured in the course of performing their duties are entitled to full medical care for the injury plus other monetary benefits to compensate them for any permanent disabilities they might incur. On the other hand, employers are mandated to subscribe to insurance companies for workers’ compensation and failure to comply attracts some serious financial penalties. Employers who are deemed to be subjected to high risks are waved from the current market rates and their insurance cover is determined at a certain rate (Guyton 12).
According to Guyton (6), other states that have been using workers’ compensation include Florida and New York. In Florida, injured workers receive two kinds of benefits; medical care and income replacement. In New York, it is a requirement that all business owners insure their workers for workers’ compensation in commercial insurance companies. Just like in Florida, injured employees in Florida benefit through medical care and other monetary benefits. However, these benefits depend on the extent of the disability. Disabilities are classified as temporally or permanent and total or partial. Permanent total injury is the highest kind of injury and the worker is entitled to receive the highest level of monetary benefits although this depends on the strength of the company.
Statutory worker’s compensation programs are systems developed by the statutory bodies to ensure that both the employee and employer equally benefit in cases of injuries. It is a plan that ensures that an employee is compensated for any time lost and is also given medical attention if he sustained the injury in the course of performing his employment duties. Before the introduction of workers’ compensation laws, employees had to file their cases in civil courts where they hardly received any benefits. These laws favored employers and employees were seen as just servants. However, certain cases would require the employer to compensate large sums of money to the injured employee. The workers’ compensation system is aimed at quick medical payments, therapy, compensation for time lost, and at the same time controlling cost on the side of employers.
The trade-off between employers and employees is known as a worker’s compensation bargain. This ensures that both parties do not lose. Statutory compensations are based on an employee’s ability to acquire job placement under his condition, for example, an employee who has lost one leg or an arm can be able to find partial employment.
However, this does not include the difficulties encountered in the process of looking for employment because of an employee’s disability.
In many nations, workers’ compensation is consuming a lot of business costs, making it appear as a constituent of the costs in a business. However, this can be minimized by employers through various means, for example, offering emergency preparedness training, recognizing the cost drivers, and establishing business policies and procedures. Certain areas can be considered as key cost drivers which include training of managers and supervisors, coordination of medical care, implementation of an intermediary duty program, improving employer-employee relationships, establishing fraud and abuse among others. As employers are working to limit their compensation costs, labor unions are working to increase reimbursements compensated to workers. In the United State, all employees injured in the course of performing their duties are entitled to full medical care for the injury plus other monetary benefits to compensate them for any permanent disabilities they might incur.
AFL-CIO. Workers’ compensation. American’s union movement. 2010. Web.
Anon. Workers’ compensation program History. Office of state personnel. 2010. Web.
Burton John. Workers compensation resources. 2010. Web.
Guyton Gregory P. A brief history of workers’ compensation. 2010. Web.
Thomason Terry, Schmidle Timothy P. and Burton John F. Workers’ compensation: costs, and safety under alternative insurance arrangements. New York: W.E Upjohn, 2001.
Department of labor and workforce development. Rates and statistics, Workers’ compensation benefit rates. 2010. Web.
|Temporary Disability Rate||Permanent Partial Disability||Total Disability Rate||Death Benefits|
|1997||$496 max /$132 min||$496 max /$35 min||$496 max /$132 min||$496 max|
|1998||$516 max /$138 min||$516 max /$35 min||$516 max /$138 min||$516 max|
|1999||$539 max /$144 min||$539 max/ $35 min||$539 max /$144 min||$539 max|
|2000||$568 max /$151 min||$568 max/ $35 min||$568 max /$151 min||$568 max|
|2001||$591 max /$158 min||$591 max /$35 min||$591 max /$158 min||$591 max|
|2002||$629 max /$168 min||$629 max /$35 min||$629 max /$168 min||$629 max|
|2003||$638 max /$170 min||$638 max /$35 min||$638 max /$170 min||$638 max|
|2004||$650 max /$173 min||$650 max /$35 min||$650 max /$173 min||$650 max|
|2005||$666 max /$178 min||$666 max /$35 min||$666 max /$178 min||$666 max|
|2006||$691 max /$184 min||$691 max /$35 min||$691 max /$184 min||$691 max|
|2007||$711 max /$190 min||$711 max /$35 min||$711 max /$190 min||$711 max|
|2008||$742 max /$198 min||$742 max /$35 min||$742 max /$198 min||$742 max|
|2009||$773 max /$206 min||$773 max/$35 min||$773 max/$206 min||$773 max|
|2010||$794 max/$212 min||$794 max/$35 min||$794 max/$212 min||$794 max|
Temporary Disability Rate: 70% of wages with the noted maximum/minimum.
Permanent Partial Disability: Rate depends on type and severity of injury, with the noted maximum/minimum.
Total Disability Rate: 70% of wages with the noted maximum/minimum.