Workers’ compensation is a state-regulated insurance program that helps people with work-related injuries and illnesses. Employees covered by workers’ compensation insurance (a.k.a. workers comp) get medical care necessary to treat their injuries and illnesses. Depending on the type and severity of the injury, workers’ compensation may also provide:
- payments to replace some of an injured employee’s lost income
- burial expenses for employees killed on the job;
- death benefits for dependents of employees killed on the job.
Across the country, workers’ compensation is available to help protect businesses and employees, but it is not always required. Texas is unique in that business owners are not required by law to carry workers’ compensation insurance. However, because of its benefits to both employers and employees, a large percentage of the Texas workforce is covered by a workers’ compensation policy. Meanwhile, private employers who work on public projects must have workers’ compensation for the employees working on the project.
An employee’s medical expenses, rehabilitation costs, and lost wages are usually covered. Workers’ compensation does not pay for injuries that:
- are intentional or self-inflicted;
- result from horseplay or voluntary drug or alcohol intoxication;
- are inflicted by someone for personal reasons unrelated to the job;
- result from voluntary participation in off-duty recreational, social, or sports events; or
- result from weather (floods or hurricanes)
Accidents to consider
Workers comp could involve back injuries from lifting heavy objects in an office or warehouse. It could be injuries from driving trucks, broken bones from a fall in your main office, or even an eye injury from manufacturing.
Because so much heavy equipment is used on oil rigs and in the oilfields, there can be many different causes of serious injuries in the oilfields. Some common causes of oilfield accidents:
- Improperly trained employees;
- Inadequate safeguards and unreasonable deadlines;
- Violations of safety policies and procedures;
- Equipment failure;
- Drilling Rig Accidents; and
- Faulty communication or cooperation between contractors and employees
Lawsuits from Injuries
Workers’ compensation insurance coverage limits an employer’s liability if an employee sues the employer for damages. In Texas, where private sector employers can choose whether to carry workers’ compensation insurance coverage, electing to do so can mean that those liability limits will be in place.
Employers with workers’ comp are protected from most lawsuits brought by injured employees. If an employer has workers’ compensation insurance, an injured employee may sue only after the dispute has been through DWC’s dispute resolution process. The court will consider DWC’s recommendations, and will address only the issues that were part of the DWC dispute process.
In Texas, lawsuits arising from workplace injuries are not significant in number, and lawsuits that result in an extraordinary recovery number only about 1 in every 2,400 workers’ compensation related injuries. However, while the number of injury/illness cases declines, the average cost of each type of injury/illness increases dramatically.
Cost of Workers Comp
The cost of workers comp varies widely and it is impractical to list specific costs of this insurance. There are many factors an insurance company will consider in quoting the premium required for worker’s compensation insurance. These include the classification of your industry, your company’s past record of work-related injuries, the amount of your payroll, and the type of injuries that may occur in your business.
For example, an oilfield services company would have a higher worker’s compensation premium than a retail store. The reasons are there are many more opportunities for serious injury than a typical retail slip-and-fall accident. The oilfield services company would normally have a history of former injuries and would likely have more employees on the payroll as well.
An insurance company may base its rates on:
- workers’ compensation classification relativities established by the commissioner of insurance;
- the company’s own independent relativities filed with TDI; and
- loss costs filed by the National Council on Compensation Insurance (NCCI), which is an advisory organization to TDI.
Employers may not charge employees directly for workers’ compensation coverage.
An insurance company assigns policyholders to one or more classifications based on the policyholder’s type of business. The company then determines the employer’s payroll for each classification.
The employer’s workers’ compensation insurance company pays attorneys’ fees and other defense costs. There are many insurance companies licensed by the Texas Department Insurance to sell workers’ compensation insurance coverage policies. You could locate these with a Google search but a better method is to have a discussion with businesses similar to yours or with industry trade groups.
Employers can provide workers’ compensation by:
- buying a workers’ compensation insurance policy from a licensed insurance company;
- self-insuring their worker’s compensation claims, if they meet the requirements and are certified by DWC; or
- joining a self-insurance group that’s approved
If you have workers’ compensation insurance coverage, are a certified self-insurer, or a member of a certified self-insurance group of employers, file the Employer’s First Report of Injury or Illness (DWC Form-001) with your insurance carrier within eight days of the date your employee is unable to work for more than one day due to the injury, or immediately if the injury is an occupational disease or death.
Employers who choose not to have workers’ compensation insurance are called nonsubscribers. Nonsubscribers must file an annual notice with Division of Workers Comp, post notices in their personnel offices and workplaces, and tell each new employee that they don’t have workers’ compensation.
Texas employers who do not carry workers’ compensation insurance coverage are required to report their non-coverage status and work-related injuries and occupational diseases to the Division of Workers’ Compensation (DWC). Employers who do carry workers’ compensation insurance coverage are required to report all known occupational diseases and any work-related injuries that result in more than one day of lost time. Employers that fail to meet these requirements commit an administrative violation and may be subject to administrative penalties.
Injured employees can sue nonsubscribers over workplace injuries and illnesses. If they’re sued, nonsubscribers cannot argue in court that negligence caused the injury or that the injured employee knew about the danger and voluntarily accepted it.
Large private employers may self-insure their workers’ compensation claims. To self-insure in Texas, employers must:
- have approval from DWC
- provide a security deposit of $300,000 or more
- have various other types of insurance coverage.
- Alternatively join a self-insurance group.
In summary, workers comp is an outsourced function by the HR office. HR will complete the initial paperwork and refer the employee. This topic of workers comp lends itself to the idea of workplace safety programs plus drug alcohol screening. The cost of effective safety programs can easily cover the cost of workers comp. Then again that is the topic of another article.
Dr. Bill Price is the Dean of the College of Business and a Professor of Management at The University of Texas of the Permian Basin. He has previously held several positions in human resource management and other leadership roles. He has taught various courses in human resources and has published a number of articles in the areas of human resource