The Star-Ledger in New Jersey provides an excellent basic explanation of workers’ compensation as part of its series on how the system works and often fails injured workers.
The newspaper primer is reprinted here:
Please note that workers’ compensation benefits and rules vary from state to state. But the New Jersey example provides a good overview of how things work. Consult your state’s workers’ comp board or Industrial Commission or a workers’ comp attorney to find out how things work where you live.
WHAT IT IS: Workers' compensation is a no-fault insurance program that pays
benefits to employees who suffer job-related injuries or illnesses.
WHO IS COVERED: Workers' comp covers every employee in New Jersey,
including those who are in the country illegally. Every state but Texas mandates
that employers provide some form of compensation insurance for their workers.
HOW IT WORKS: An injured worker files a claim and, with input or
direction from his employer or its insurer, receives medical treatment and
salary replacement until he can return to the job. If the injury is permanent,
the insurer compensates the worker for the loss.
If both sides disagree on the facts of the injury, terms of treatment or the amount of compensation, the case goes to workers' compensation court, where a judge mediates a settlement or presides over a trial and determines an award. In exchange for these benefits, the worker cannot bring a civil action against the employer for pain and
suffering or other damages, except in cases of intentional acts. Each state
devises and administers its own workers' compensation program.
CLAIMS: About 120,000 claims are filed each year by New Jersey
workers. Most are resolved quickly, but those that aren't -- roughly 40,000 a
year -- end up in comp court.
AMOUNT OF PAYMENT: Workers who are disabled, whether temporarily or permanently, receive 70 percent of the state average weekly wage for their profession, or a maximum of $732, according to 2008 rates. For partial disability, the amount depends on the type and severity of the injury.
WHO RUNS IT: The New Jersey Division of Workers'
Compensation, which is part of the state Department of Labor and Workforce
Development. Cases are heard by about 45 judges in 15 locations around the
state. Overall, the division employs 170 people with an annual budget of $23.7
HISTORY: Workers' compensation traces its roots to the
Industrial Revolution in the late 1800s in the United States. As factories
multiplied, so too did the number of plant accidents and lawsuits. Cases clogged
the civil courts, and neither side benefited. Injured laborers languished
without income; employers battled costly litigation and uneven justice.
Comp systems were designed to bring both sides to a quick resolution, giving workers a stream of money, establishing uniformity in settlements and arbitration. New Jersey set up its framework in 1911. By the late 1940s, every state had workers' compensation laws.
THE BIG PLAYERS: New Jersey Manufacturers,
created by industrialists in 1913, remains the state's largest workers'
compensation insurer, with nearly a quarter of the market. Six companies follow:
Liberty Mutual, Travelers, Hartford, AIG, Zurich and Selective. Together they
represent more than half the market. About 385 other companies make up the rest.
PREMIUMS: Insurers in New Jersey collected $1.8 billion in
premiums in 2006, or $500 million more than they took in five years earlier,
according to state records.
WHO SETS THE RATES: Insurers help set their industry's premiums each year through a state agency called the Compensation Rating and Inspection Bureau. Each October, the bureau's governing committee, elected by the insurers, votes on a recommended premium rate, which must be approved by the state insurance commissioner.