A Guide to Workers’ Comp for Small Businesses

Your start-up has gotten up, and now you need to hire a few employees. Besides learning what to do about payroll and the various mandatory deductions, you believe that you may also need workers’ compensation insurance, but you don’t know much about it.

What is workers’ comp, when do you need it, what are your rights and responsibilities as an employer under workers’ comp law, and what does it cover? This Guide will tell you.

What is Workers’ Comp?

Workers’ compensation is a statutory no-fault insurance scheme created to protect workers as well as their employers by organizing the delivery of medical services and a lost wages benefit to a worker who is injured or falls ill in the course of employment. Workers’ comp may also provide a death benefit to a worker’s family if he or she is killed in a work-related accident.

Without workers’ comp, employees and employers would be knee-deep in litigation to determine liability for the injury or illness, delaying payment to the injured worker for their lost wages and medical expenses while taking time and money away from business operations.

Workers’ compensation insurance is intended to streamline the process and get the employee healed and back to work. Unfortunately, insurance companies frequently balk at providing the full benefit the worker believes he or she is entitled to, resulting in ongoing litigation between the insurance company and the injured worker’s attorney in designated workers’ compensation courts. Even so, the system largely mitigates direct conflict between employer and employee and gets the injured worker paid much more quickly than if the issue was litigated in the regular court system.

When Does an Employer Need Workers’ Compensation Insurance?

Workers’ compensation insurance coverage is required by state law for any employers who have one or more employees, even if they are family members or are only working part-time.

Are Any Employers Exempt from the Workers’ Comp Insurance Requirement?

Yes. The following are exempt:

• licensed real estate agents or brokers
• licensed insurance agents who work on commission
• domestic or casual laborers
• farmers with a single employee who works less than 30 days a year or earns less than $1,200 a year
• a farmer’s spouse or a farmer’s child under the age of 18

For sole proprietors, partners, and corporate officers, workers’ comp coverage is optional.

How Does an Employer Get Workers’ Comp Insurance?

Employers can purchase workers’ compensation insurance in any of these three ways:

• Consult an insurance agent or broker for assistance;
• Purchase a policy directly from one of over 300 insurance companies that write workers’ comp policies;
• Obtain insurance from the State Workers’ Insurance Fund.

The State Workers’ Insurance Fund (SWIF) helps new businesses obtain insurance if they have difficulty obtaining coverage from private carriers. In contrast, large well-established businesses that have been in operation for three years or more may apply for approval to self-insure through a group insurance policy covering other businesses in their field.

What are an Employer’s Responsibilities under Workers’ Comp?

Notice Requirements

First, an employer must post a notice stating that the business has workers’ comp insurance and the name, address, and telephone number of the insurance company that wrote the policy. An employer must also give a brochure to employees that explains their rights and responsibilities and sets forth the procedure an employee is to follow if he or she is injured or falls ill on the job.

Reporting Requirements

An employer must file a report within 24 hours if a worker’s injury results in death, and within seven (days) for any other injury. Employers must also file annual reports of workers’ compensation benefits paid to employees by April 15 of each year.

Claim Handling Requirements

After receiving notice or becoming aware of a work-related injury or illness, an employer must:

• Investigate to determine compensability;
• Provide the injured worker notification of rights and duties regarding medical treatment coverage;
• Pay medical bills for the work-related condition within 30 days, and
• Pay compensation for lost wages within 21 days.

What is a Compensable Injury?

A “compensable injury” is a work-related injury or illness that qualifies the worker for benefits through workers’ compensation insurance. Sometimes it is not always clear whether an illness or injury is compensable. If an employer has questions, he or she should consult with the insurance provider or state workers’ compensation board.

Compensable injuries are injuries that:

• happened to an employee, not a vendor or independent contractor;
• are the result of a workplace injury or illness incurred during the course of employment, and;
• result in impairment of the ability to do the job, and therefore lost wages.

Typical work-related injuries include:

• Injuries from workplace accidents, such as falling off a ladder or slipping on a wet floor;
• Repetitive stress injuries such as carpal tunnel, tendonitis, bursitis;
• Occupational illnesses such as asbestosis, sunstroke, or hearing loss;
• Mental stress injuries such as anxiety or emotional distress;
• Fatality, for example, from a fall from scaffolding or exposure to chemicals.

Workers compensation insurance does not cover employees if they are:

• Injured while under the influence of drugs or alcohol;
• Injured during horseplay or fighting;
• Injured while commuting to or from work in a private vehicle;
• Injured during a voluntary, unsponsored social gathering with coworkers, like a party or picnic;
• Injured while on break off-site.

This Guide gives you the basic outline of workers’ compensation insurance and how it works. Your insurance agent or carrier will help you comply with all requirements, and ideally, if those requirements are met, your injured worker will be back on the job sooner rather than later.

About the Author

Veronica Baxter is a blogger and legal assistant living and working in the great city of Philadelphia. She frequently works with Larry Pitt, Esq., a busy workers’ compensation lawyer in Philadelphia.