Workers’ compensation insurance can protect an injured
employee from a devastating financial loss and keep your shop’s bottom line in
the black. But it won’t protect you from poor planning.
By Darlene B. Bordeaux
Contributing Editor
You, the shop owner doing business in this new century, are more open to litigation from your employees. Some of these lawsuits will be legitimate; others may be frivolous. It is up to you and your management team to make sure you do everything possible to limit the number of all suits, especially in the area of workers’ compensation.
The workers’ compensation system provides replacement income and medical expenses to employees who suffer work-related injuries or illnesses. Benefits may also extend to the survivors of workers who are killed while working in the shop.
Workers’ compensation is a no-fault system. Your employees are entitled to receive the stated benefits whether or not you, the shop owner, provide a safe workplace and whether or not your employee’s own carelessness contributed to the injury or illness. But you, too, receive some protection because your employees are limited to fixed types of compensation—basically, partial wage replacement and payment of medical bills. Your employees can’t get paid for pain and suffering or mental anguish.
To cover the cost of workers’ compensation benefits for your employees, you’ll need to pay for insurance—either through a state fund or through a private insurance company. While some states allow self-insurance, the technical requirements usually make this an impractical alternative for smaller shop owners.
Coverage Requirements
Each state has its own workers’ compensation statute. The details may differ from state to state, but one thing is clear: If you have employees, you need to obtain workers’ compensation coverage.
Some states allow you to self-insure—a process that typically requires your shop to maintain a hefty cash reserve earmarked for workers’ compensation claims. Usually, this isn’t practical for small shop owners. Most will buy insurance through a state fund or from a private insurance carrier. Some states require that business owners purchase coverage from the state fund; these include North Dakota, Ohio, Washington and West Virginia. The following states have state-run workers’ compensation funds: Arizona, California, Hawaii, Idaho, Maryland, Michigan, Minnesota, Montana, New York, Oklahoma, Oregon, Pennsylvania and Utah. Business owners have a choice of buying coverage from the state or from a private insurer.
What is Your Liability?
The first mistake many shop owners make is not having an up-to-date, in-force company policy manual and employee handbook. If you don’t have these two documents, you have no legal ground on which to stand if an employee decides he or she isn’t being adequately compensated for an on-the-job illness or injury. Not having these legal documents opens you up to any litigation that a smart attorney could dream up.
You must make sure that your policy manual spells out exactly what is and is not covered in your workers’ compensation policy. The manual also needs to state the maximum amount any one employee can expect to receive from your disability fund for any given situation.
Another area that can get a shop owner into trouble is the rejection of a claim because you think the employee is faking an illness or injury, or that the employee is inflating the amount he or she really needs in order to be “adequately” compensated.
In some states—New Jersey, South Carolina and Texas—workers’ compensation coverage isn’t necessary for an employer.
You can choose whether or not you want to secure workers’ compensation insurance for your shop. But if you opt not to and you’re sued by an employee who claims to have been injured on the job by your negligence, you won’t be able to use the employee’s own carelessness as a defense. Therefore, most wise shop owners obtain workers’ compensation, no matter where their shops are located.
Coverage of Injury and Illness
As a shop owner, you needn’t dig very deep into the finer points of workers’ compensation law. The state fund that covers your shop will have its own lawyers resolve legal questions about whether a worker is entitled to compensation for a particular disability, and if so, how much the worker is entitled to receive. When an employee seeks to receive benefits that are questionable, these lawyers should challenge the employee on your behalf.
Still, as a well-informed shop owner, you should learn more about how the system works. Even though the laws vary from state to state, there’s enough similarity to justify some general statements:
-To be covered, an employee’s injury needn’t be caused by a sudden accident, such as a fall. Any injury that occurs in connection with the job is covered. Many of your employees, for example, could receive compensation for repetitive motion injuries, such as carpal tunnel syndrome.
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