Workers' Compensation

Advantages & Disadvantages

Every state has enacted workers' compensation laws to protect employees against loss of income and for medical payments due to a work-related injury, accident, illness, or disease. In the vast majority of states, workers compensation coverage is mandatory; in Texas and New Jersey, it's voluntary.

The discussion that follows will give you a feel for what workers' compensation laws will require of you. Before you set up your workers' compensation program, however, you should discuss it with your attorney to make sure that you're complying with all of the applicable laws.

Do the laws apply to you?

In most states, all employers who have at least one employee are covered. While some states exempt very small employers, they don't all have the same definition of what constitutes a small employer. The most common exemption is for employers with fewer than three employees, but some provide the exemption to employers with fewer than four and others to employers with fewer than five. Of course, even if you're exempt, you can generally choose to participate in the state program.

Advantages and disadvantages

There are both advantages and disadvantages to having a state-mandated workers' compensation system or to voluntarily participating in the system even if not legally required.

The advantages to you are: that your liability for on-the-job injuries is limited to the remedies available under the workers' compensation system; you can't be sued for everything you own that the types of benefits you have to pay to employees are limited to those available under the laws that your disability planning is made easier because the costs are predictable.

The disadvantages to you are: that your premiums may be high, depending upon your accident record that filing requirements increase your administrative burdens that spurious claims may needlessly take up your time

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