Understanding Workers’ Compensation
                     Understanding Workers’ 
Compensation
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Workers' Compensation is a critical safety net for employees who get injured or ill on 
the job. This comprehensive guide will help you understand its ins and outs.
What is Workers’Compensation?
Workers’‍Compensation,‍often‍referred‍to‍as‍workers'‍comp,‍is‍a‍legally‍required‍
program‍that‍offers‍benefits‍to‍workers‍who‍suffer‍injuries‍or‍illnesses‍as‍a‍result‍of‍their‍
job.‍It's‍essentially‍a‍disability‍insurance‍program‍for‍workers,‍providing‍financial‍and‍
healthcare‍benefits.
How Workers’Compensation Works in the United States
In the U.S., each state primarily handles workers’ compensation, and the required 
benefits can vary significantly. Only Texas does not mandate employers to maintain 
workers’ compensation insurance.
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Core Benefits of Workers’ Compensation
By accepting workers’ compensation benefits, employees waive their right to sue 
their employer for damages. The compensation may include partial salary 
reimbursement and coverage of medical costs. However, it's essential to note that 
workers' comp differs from unemployment benefits or disability insurance.
Understanding the Specifics of Workers’ Compensation
Workers’ compensation benefits may include partial wage replacement during the 
period the employee cannot work. They may also cover healthcare services and 
occupational therapy.
Most workers’ compensation programs are funded by private insurers, from premiums 
paid by individual employers. Each state has a Workers’ Compensation Board that 
oversees the program and steps in during disputes.
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Federal Workers’ Compensation Programs
There are federal workers’ compensation programs for federal employees, longshore 
and harbor workers, and energy employees. Another federal program, the Black Lung 
Program, handles death and disability benefits for coal miners and their dependents.
Workers’ Compensation Benefits Requirements
Requirements for workers’ compensation vary from state to state. Some states 
exclude small businesses from the mandate for coverage, while others have different 
requirements for various industries. The National Federation of Independent Business 
(NFIB) maintains a summary of each state’s worker compensation requirements.
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Salary Replacement and Healthcare Cost Reimbursement
The salary replacement paid to an employee under workers’ compensation is 
typically less than the person’s full salary. The most generous programs pay about 
two-thirds of the person’s gross salary.
Most compensation plans offer coverage of medical expenses only related to injuries 
incurred as a direct result of employment. If an employee dies as a result of a work-
related incident, workers’ compensation makes payments to the worker’s 
dependents.
Special Considerations and Disputes
A claim for workers’ compensation may be disputed by an employer. In that case, the 
Workers’ Compensation Board may be asked to resolve the dispute. Disputes can 
arise over whether the employer is actually liable for an injury or illness. Workers’ 
compensation payments are also susceptible to insurance fraud.
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Independent Contractor Exception
In most states, only regular employees are eligible for workers’ compensation; 
independent contractors are not. This was a significant point of debate over a 
California ballot measure that sought to extend employee benefits to drivers for ride-
sharing apps like Uber and Lyft.
Types of Workers’ Compensation
In the U.S., workers’ compensation rules are handled by the individual states. The 
lack of federal standards for workers’ compensation has resulted in extremely varied 
policies for the same kinds of injuries from state to state.
Workers’ Compensation: Coverage A vs. Coverage B
There are two types of workers’ compensation coverage: Coverage A and Coverage B. 
Coverage A includes all of the state-mandated benefits that an injured or ill employee 
is entitled to receive from the employer’s insurance.
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Coverage B pays benefits that exceed the minimums required by Coverage A. They 
usually are paid only as the result of a successful lawsuit brought by the employee for 
negligence or other misconduct by the employer.
The Bottom Line
Every state (except Texas) requires employers to provide workers’ compensation 
coverage to at least some of their employees. The states write the rules, so there are 
many exceptions and exemptions. Contractors and freelancers are rarely covered, 
and many states exclude certain professions from the mandate or otherwise limit the 
scope of the benefits.
Note: This guide provides a general overview of workers' compensation; it does not 
offer legal advice. The rules and regulations surrounding workers' compensation can 
vary greatly from state to state, so it's essential to consult with a legal professional or 
your state's Workers' Compensation Board for advice tailored to your specific 
situation.