Worker’s Compensation Laws

Cite this article as: Jason Mance Gordon, "Worker’s Compensation Laws," in The Business Professor, updated January 15, 2015, last accessed April 7, 2020,
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Worker's Compensation Laws
This video explains what are Worker's Compensation Laws.

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What are “Worker’s Compensation” laws?

Worker’s Compensation laws are either state or federal statutes designed to protect employees and their families from the risks of accidental injury, death, or disease resulting from their employment. It is a form of insurance for the employee that is paid for by the employer. Specifically, if an employee suffers an accidental injury in the course of performance of her work obligations, the administering worker’s compensation board or commission will pay the employee a pre-determined percentage of her wages during the period of temporary disability. The governing commission also administers claims and makes determinations as to the validity of claims for injuries allegedly suffered in the course of employment.

Worker’s compensation laws protect employers as well as employees. It assures that an employee will be compensated in the event of a work-related injury. This protects the employee from the consequences of working for an insolvent employer that may not be able to continue paying the employee or that may go out of business in the event the employee sues the employer. Worker’s compensation payments are generally the exclusive remedy available to the injured employee. That is, the employee cannot sue the employer unless the conduct of the employer that injured the employee was intentional.

•    Note: The Federal Employee’s Compensation Act (FECA) establishes a worker’s compensation scheme for federal employees. The FECA program is administered by the Office of Workers’ Compensation Programs (OWCP). All states have statutes establishing similar plans and state-run commissions or boards to administer the program. Some states allow employers to self-insure for worker’s compensation claims, while other states require employers to make recurring payment to a state-funded, worker’s compensation plan. The premiums paid by employers are the funds used to compensate injured employees making worker’s compensation claims.

•    Discussion: How do you feel about federal and state regulation of injuries employees suffer while on the job? Are these regulations justified? Why or why not? Who enjoys a greater benefit, employees or employers? Why?

•    Practice Question: Martha is an employee of ABC Corp. She is walking down the stairs in the corporate office, trips, and breaks her ankle. Because of the nature of her work requires standing and walking, she is unable to work for several weeks. What benefits do worker’s compensation laws provide to her and her employer? What are the disadvantages to Martha?

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