What is a Workers' Compensation Plan?

Workers' compensation is the benefit provided by the employer to the employee in the form of insurance to cover for their lost wages, medical expenses, disabilities, and death that occurred during the course of employment. It is a government-mandated system and is offered by the employer during the course of employment. Small business owners also have the liability to provide compensation benefits under the government-mandated system.

What are the Workers' Compensation Plans?

Medical expenses reimbursement

If employees accidentally get injured or fall sick during their employment or because of work they become weak, then they can claim medical compensation insurance from the employer. The employer will authorize a medical provider for the treatment.

Wage benefits

These benefits covered employees lost wages. If injured employees are unable to come to work because of their illness which is caused due to employment, this compensation insurance pays their part of lost wages.

Disabilities

Workers' compensation insurance covers the disabilities caused to employees during the course of employment. Organizations should pay a certain amount to employees who lost their job due to their disabilities. Disabilities caused may be temporarily or permanently. Temporary disability prevents injured employees from working for a certain period of time, after their recovery they can return to work. Permanent disability restricts employees from their work for a lifetime. Their compensation insurance also depends on their disability.

Death and funeral expenses

If employee losses their life due to work-related injury during the course of employment or other illness because of their employment, workmen's compensation insurance benefit should provide to the policy holder’s family and beneficiaries. Organizations may also provide jobs to the deceased worker’s family. This compensation insurance shall cover the burial and funeral expenses also.

Vocational rehabilitation

This benefit covers employees going on care. An injured employee who can't rejoin in a previous job due to his/her injury or disability, can get training for new technology, update new skills in various departments, and career counseling in vocational rehabilitation. This compensation insurance helps employees to find new roles for them and helps to make them self-employed. This plan includes vocational training and counseling. These activities aid to refresh the employee’s pattern of thinking.

Eligibility requirements for a workers' compensation plan

A person must be an employee

The person must be an employee of the organization. Only employees of an entity can demand workers' compensation insurance from the entity. Contractors and seasonal workers are not included in the list of employees for compensation benefits.

The employer must cover compensation insurance

Employers must carry compensation insurance for their workers. Then only the employer can provide financial assistance to the workmen at their illness, disability, or inability to earn. Employers must have insurance to provide compensation benefits to employees. The employer shall manage insurances by investing in private insurances or by the state-run workmen compensation plan.

The injury must be work-related

Employees must be disabled or fall sick during the period of employment. This insurance protects employees from injury or disability which is occurred during the course of work. Compensation insurance is paid only for work-related injuries.

File compensation insurance before the due date

Employees are required to submit a claim for compensation insurance before the specified period of time. The time period may differ from state to state. Many states allow employees to file within a period from one month to years of injury.

Keep medical invoices and other documents related to nursing

To claim workers' compensation insurance workers must keep proof of medical treatments and other bills connected to the treatment of the injury. These bills and documents act as evidence to file workers' compensation insurance.

Excluded from workers compensation

The following cases prevent workers from claiming workers' compensation insurance.

• Employers are not liable to give compensation funds to workers if accidents or other injuries happen to workers because of their negligence and injuries that happened because of using alcohol and drugs.
• If the injury or disability is not severe or the recovery period is not exceeding three days then workers should not go for compensation benefits.
• Workers' compensation insurance is not applicable if the injuries happen not because of employment but due to disputes between co-workers and unexpected events that happened outside the workplace.
• If there is an agreement between entity and worker before the appointment. The pre-agreement specifies that compensation benefits will not be paid for the specified cases.

Covid-19 workers compensation insurance

Transport workers, grocery shop workers, factory workers, health care employees, sanitary workers, and small business owners are at a high risk of getting affected by a coronavirus. States have taken actions regarding covid-19 compensations. Many of the states announced wage replacement benefits and other health care benefits should form part of the compensation fund for the affected workers. Still some states deny the workers benefit for the covid-19 infection, as the coronavirus will not be recognized as an occupational disease. Occupational disease means disease arises only because of employment. Office Workers Compensation Programs (OWCP) set up by states covid-19 team to support covid-19 affected workers during their performance. To get these OCWP schemes, workers need to furnish the medical details regarding covid-19, how they were affected with covid-19, detail of any covid-19 affected person working in their office, and other relevant particulars.

Context and Applications

This topic is significant in the professional exams for both undergraduate courses & postgraduate courses, especially for

• Bachelors of Law - Business and Finance Law
• Masters of Law - International Business Law Specialization
• Bachelors of Law in Corporate Law

Practice Problems

Question 1: Who has a legal liability to offer compensation plans to workers?

   a) Employee

   b) Employer

   c) Government

   d) All of the above

Answer: Option (b) is correct.

Explanation: Employers have a legal liability to provide compensation insurance to workers for their work-related injuries. Every employer has an obligation to provide financial assistance to their workers during their struggling period.

Question 2: Why wage benefit is paid to employees?

   a) To cover medical expenses

   b) For disabilities

   c) To meet funeral expenses

   d) To cover lost wages

Answer: Option (d) is correct.

Explanation: Wage benefits cover workmen’s lost wages. If injured employees are unable to come to work because of their illness which is caused due to employment, these wage compensation insurance will pay their part of lost wages.

Question 3: What is excluded from workers' compensation plans?

   a) Injury due to negligence of workers

   b) Work-related injury

   c) Illness because of employment

   d) All of the above

Answer: Option (a) is correct.

Explanation: Accidents arise due to the negligence of workers and using alcohol & drugs is excluded from workers' compensation insurance. Compensation benefits are paid only for work-related injuries. Negligence of workers and alcohol use is not allowed in the organization.

Question 4: What are the types of compensation plans?

   a) Medical treatment

   b) Vocational rehabilitation

   c) Wage replacement

   d) All of the above

Answer: Option (d) is correct.

Explanation: Medical treatment, wage replacement, disabilities, death and funeral expenses, and vocational rehabilitation are the types of workers' compensation plans. When employees are wounded during their employment period, they are entitled to receive benefits.

Question 5: What are the eligibility criteria for a workers' compensation plan?

   a) Person must be an employee

   b) Submit a claim before the specified date

   c) Employer must have an insurance

   d) All of the above

Answer: Option (d) is correct.

Explanation: To claim the compensation benefits, the person should be a worker of the organization. His employer must carry compensation insurance. Additionally, the wound should be associated with the work. Employees must submit a claim for compensation insurance within the date specified by relevant states.