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Workers’ Compensation

Posted on October 18, 2025October 20, 2025 by user

Workers’ Compensation

Workers’ compensation is a state-mandated insurance system that provides benefits to employees who are injured or become ill because of their job. It typically covers medical care, partial wage replacement, disability and rehabilitation services, retraining, and death benefits for dependents. In exchange for these guaranteed benefits, employees generally give up the right to sue their employer for negligence (no-fault system). Employers pay the insurance premiums; rules and benefits vary by state.

Key takeaways

  • Workers’ compensation pays medical costs, partial lost wages, disability and rehabilitation, job retraining, and survivor benefits for work-related injuries or illnesses.
  • Employers (not employees) pay premiums; coverage requirements and benefit levels are set by each state. Texas is the only state that does not require employers to carry workers’ compensation.
  • Accepting workers’ compensation usually means waiving the right to sue the employer, though limited exceptions exist in some states.
  • Independent contractors, many gig workers, and certain job categories may be excluded—eligibility varies by state.
  • Federal programs exist for federal employees and specific worker groups (e.g., longshoremen, coal miners).

What workers’ compensation covers

Common benefits include:
* Medical treatment and related healthcare costs for job-related injuries or illnesses.
Wage replacement (often a portion of pre-injury earnings, typically around two-thirds).
Temporary disability (while recovering) and permanent disability (partial or total) benefits.
Rehabilitation and vocational retraining to return to work or transition to a new role.
Death benefits and survivor compensation if a work-related incident is fatal.

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Benefits are usually non-taxable, though tax implications can change if the claimant also receives Social Security Disability or Supplemental Security Income.

Types of coverage

  • Coverage A: The state-mandated, no-fault benefits (medical, wage replacement, disability, death benefits) that employers must provide under state law.
  • Coverage B: Benefits above the state minimums, typically available only after a successful negligence lawsuit or when an employer purchases broader coverage. Some employers combine A and B for additional protection.

Who is covered and who is exempt

  • Most employees are covered under state workers’ compensation laws, but states set thresholds and exclusions.
  • Independent contractors, freelancers, and many gig workers are generally not covered unless specifically classified as employees.
  • Certain professions may be excluded or treated differently depending on state law (examples include some farm laborers, real estate agents, domestic workers, musicians, or crop-dusting crews in specific states).
  • Federal workers and certain maritime or energy workers are covered by separate federal programs.

Costs and who pays

  • Employers pay all workers’ compensation insurance premiums; benefits are not typically deducted from employee pay.
  • Premiums vary by state, industry risk, and employer payroll. Nationwide averages are approximate and can differ widely by jurisdiction and job risk. Examples from various states (illustrative of wide variation):
  • California: low-risk ~ $0.40 per $100 payroll; high-risk figures may be much higher.
  • Florida: low-risk ~ $0.26 per $100 payroll; higher rates for riskier jobs.
  • New York: low-risk ~ $0.07 per $100 payroll; higher-risk jobs command substantially higher rates.
  • Exact costs depend on state rates, classification of job risk, payroll size, and employer claims history.

How to file a claim

  1. Document the injury: date, time, circumstances, photos, and witness names if available.
  2. Report the injury to your employer as soon as possible (follow any state timelines).
  3. Employer or their insurer should file the claim with the workers’ compensation carrier.
  4. Follow up with the insurer to confirm filing and to get instructions about medical care.
  5. If a claim is denied, you can appeal through your state’s Workers’ Compensation Board or agency.

Legal implications and disputes

  • Accepting workers’ compensation typically bars suing the employer for ordinary negligence, creating certainty of coverage for injuries while limiting litigation.
  • Some states allow narrow exceptions permitting suits in cases of intentional harm, gross negligence, or when statutory exceptions apply.
  • Disputes about eligibility, benefit levels, or medical necessity are handled by state workers’ compensation agencies or courts.
  • Fraud (false claims, exaggerated injuries) is a concern and can lead to criminal or civil penalties.

Federal programs

Separate federal programs cover certain workers:
* Office of Workers’ Compensation Programs (OWCP) covers federal employees, longshore and harbor workers, and some energy workers.
* The Black Lung program provides benefits for coal miners and their dependents.

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Bottom line

Workers’ compensation is a state-driven, employer-funded system that provides no-fault benefits for most employees injured or made ill on the job. Coverage rules, benefit levels, exclusions, and costs vary significantly by state. Independent contractors and many gig workers are often ineligible, so it’s important to check your state’s rules and, when injured, promptly report the incident and follow the claim procedures.

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