How the Workers’ Compensation System Works

The concept of workers’ compensation is not a new one. Otto von Bismarck implemented what was called the Workers’ Accident Insurance System all the way back in 1881. This program is generally acknowledged as the model that ultimately evolved into workers’ compensation programs throughout Europe and ultimately in the United States.

Workers’ compensation insurance provides income and certain medical payments for employees who are injured on the job. The specifics of worker’s compensation insurance plans are different for every state. We will discuss the regulations for workers’ comp insurance in Pennsylvania, New Jersey, and Delaware later in this article. However there are some general characteristics that apply to virtually every plan.

The Legal Trade-Offs of Workers’ Compensation

The fundamental intent of the workers’ compensation system is to protect employees from medical bills and lost wages incurred while at work. In the event of death, workers’ compensation will often extend to the family of the deceased. The workers’ compensation program acknowledges that an employer is ultimately responsible for the safety of company employees and the system holds that employer accountable for it.

On the employer’s side, most workers’ compensation plans limit the extent to which an employer can be sued for injuries that happen at work. With the workers’ compensation plan in place, employees essentially relinquish their tort liability options. Often referred to in an employee/employer relationship as the “compensation bargain,” arguably the most important intent of the workers’ comp concept was to prevent employers from going out of business as a result of excessive awards for injuries, damages, or death resulting from work-related accidents.

Who Is Covered — and Who Is Not

As mentioned previously, the details of required coverage and eligibility vary from state to state. Generally speaking, workers’ compensation protection extends only to actual employees, either full or part time. It does not extend to independent contractors working on assignment. Additionally, certain industries may also be excluded from workers’ comp protection, such as domestic help and in many cases agricultural workers.

The circumstances surrounding a workers’ compensation claim are also normally considered in determining eligibility. As long as the employee was engaged in company business when the accident occurred, even if the accident did not occur on company property, it would most often be considered a covered event. For example, if an accident should happen driving a car, even a personal vehicle, while on company business, it would be covered as a workers’ compensation claim. On the other hand, an employee who was impaired as a result of drugs or alcohol, or who was shown to deliberately cause an accident in order to file a claim, would not be covered.

Workers’ Comp by State

As mentioned previously, workers’ compensation coverage varies on a state-by-state basis, sometimes dramatically. Here is a brief overview of the specific provisions of workers’ compensation insurance in Pennsylvania, New Jersey, and Delaware.

Worker’s Compensation in Pennsylvania

Pennsylvania’s workers’ compensation law states that any employer with at least 1 employee, even if it’s a family member, must carry workers’ compensation insurance. This requirement does not apply to sole proprietorships (where the only employee is the owner), to partnerships (where all of the partners are owners) or to officers of corporations. For these individuals, a company can still maintain workers’ comp insurance, but it is not mandatory.

Other exclusions from Pennsylvania workers’ compensation policies are domestic workers, casual laborers, outworkers (who perform specific tasks off premises for multiple clients), as well as real estate or insurance agents or brokers. Exclusions for workers’ compensation insurance also applies to farmers who employ 1 person working less than 30 days in a calendar year or who makes less than $1,200 during employment. Children of farmers under the age of 18 are also not covered.

In terms of obtaining coverage, employers in Pennsylvania can take advantage of a state sponsored workers’ compensation fund or obtain private coverage. Pennsylvania also has established significant criminal penalties for employers who fail to provide workers’ compensation insurance.

Worker’s Compensation in New Jersey

New Jersey’s workers’ compensation law states that unless a business or organization is covered by a federal program, it is required to maintain worker’s compensation coverage. Additionally, out-of-state companies doing business in New Jersey or performing work in New Jersey must maintain coverage as well.

With the exception of a sole proprietor with no employees, every business in New Jersey with one or more employees must provide workers’ compensation insurance. Sole proprietors can elect to cover themselves at their option. For certain businesses, New Jersey permits self-coverage. Otherwise, workers’ compensation policies are sold by private insurance providers. New Jersey has instituted stiff criminal and financial penalties for companies doing business without the proper workers’ comp insurance in place.

Worker’s Compensation in Delaware

Delaware’s workers’ comp insurance states that any business with 1 or more employees must carry workers’ compensation insurance. Delaware specifically prohibits an employer from charging employees for this coverage. Independent contractors are exempt from coverage, as are farm workers. Farmers can, however, choose to provide coverage to their employees at their discretion. Sole proprietors must only provide coverage if they employ 1 or more people in their enterprise.

Delaware worker’s compensation policies are purchased from outside providers, although certain Delaware businesses may qualify for self-insurance. Since these regulations can become quite complex, it is best to consult an attorney with expertise in workers’ compensation statutes before a decision to self-insure is made.

Expert Workers’ Compensation Lawyers in Pennsylvania

Most employees have the right to be covered by workers’ comp. If you’ve been injured on the job, you should be compensated for your injuries, pain and suffering, lost wages, and more. The attorneys at Sacchetta & Baldino have many years of experience winning cases for our clients. Reach out to us immediately to ensure that you and your family receive the maximum compensation under the law. You don’t have to go it alone–contact us today!

This article is intended only as a guideline for questions regarding workers’ compensation insurance. Regardless of whether you are an employee or an employer seeking detailed information about workers’ compensation law, it is always advisable to seek qualified legal counsel from an attorney who specializes in workers’ compensation.