Workers Compensation Insurance

Here's Everything You Need to Know When Setting Up a California Business
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The early stages of creating your business is an exciting time. With nothing but a conceptual idea in hand, the prospect of turning it into a majorly successful company is enticing. However, there are fewer exciting steps that you need to ensure are aligned and in place prior to getting things going, especially if you plan on hiring employees.

By law, all California employers are required to have workers compensation established even if you only have a single employee working under your roof. For those who are entrepreneurs and don’t know much about the logistics behind establishing a business, it would be easy to overlook this important requirement. Learn everything there is to know about worker compensation so that you can ensure you’re following the law perfectly.  

What is Worker Compensation?

First and foremost, for those who’ve never heard the term, workers compensation is a form of insurance that offers cash benefits to employees who have been injured or become ill as a part of working their job. In extreme cases, workers compensation will also offer death benefits to surviving family members if a person has died while on the job. 

This insurance is paid for by the employer, not the employee, and most employees will never even see the effects of workers compensation.

As outlined by the California Department of Insurance, there are five primary forms of workers compensation:

  • Medical Care: Medical care workers compensations provides coverage for surgeries, examinations, ambulance trips, and other medical related costs that may result from the injury or illness. 
  • Temporary Disability: Should an employee be unable to return to their role for a period of time, this form of workers compensation will offer compensation for lost wages. 
  • Permanent Disability: If a workers sustains bad enough injuries where they are unable to work in their role ever again, this form of workers comp will provide constant financial assistance throughout their life. 
  • Educational Job Relocation Benefit: If an employee is injured and can still work, just not in the same role, then this unique form of workers compensations will provide reimbursements for trainings or educational requirements to take on a new job.
  • Death Benefit: Finally, as mentioned earlier, death benefits also are offered by workers compensation to the family of a worker who dies on the job or from an illness stemming from the job.

It’s worth noting that only employers of full-time or part-time, but established, employees are required to have workers compensation. Currently, gig economy contractual based workers, such as DoorDash or Uber drivers, are not covered under workers compensation. 

What Common Accidents Does Workers Compensation Cover?

There are a wide number of injuries that fall under the umbrella of coverage for workers compensation, but most prominently the following items are typically covered:

  • Muscle sprains, tears, or strains
  • Bone fractures
  • Lacerations or punctures
  • Repetitive strain injuries 
  • Electrocution
  • Slips and falls
  • Getting crushed by an object
  • Getting struck by an object

While there are many more qualifying injuries for workers compensation, the above are some of the most common. It’s worth noting that an employee needs to be working in their normal capacity. For example, a company could argue that an employee who snuck down to a warehouse and operated machinery without being licensed isn’t eligible for this compensation, as it was completely their negligence that led to the incident. 

On top of this, employees who are injured in their workplace, but who aren’t working at the time, may not be eligible for workers compensation depending on the company and situation. 

How Much Does Workers Compensation Cost a Business? 

On average, workers compensation will cost a business $1 per $100 of payroll, meaning a company that pays out $1 million in a month for payroll is likely paying around $10,000 in that month for workers compensation. While this amount can vary, it’s a relatively small sum considering the potential size of medical bills for a single employee who could be injured while on the job. 

The Difference Between Workers Compensation and Personal Injury

In some cases, people get confused between workers compensations and personal injury lawsuits. While they are similar in nature and can have certain overlaps, they are not the same. First and foremost, workers compensation is a form of insurance whereas personal injury lawsuits are a legal filing. 

A personal injury lawsuit claims that the other parties’ actions were directly responsible for the injuries a person sustained. As an example, if your Uber driver gets into an accident with you in the car, you wouldn’t be able to file a workers compensation claim, but you could file a personal injury against the driver and/or Uber if it was the driver’s fault or an issue with the Uber app. 

If a piece of machinery malfunctions in a warehouse and injures the operator, on the other hand, they could file a worker’s compensation claim or even a personal injury lawsuit if they would rather pursue more serious legal options. It’s worth remembering that by agreeing to take workers compensation, you are also agreeing that you will not sue the company for the incident that occurred. 

As a business owner, it’s important to be aware of the fact that an employer may refuse workers compensation when offered. If there was negligence on behalf of the company that resulted in the accident, that injured employee could submit a personal injury lawsuit against the company. 

The Bottom Line

At the end of the day, worker compensations is a trade-off between both parties at a company. Employees get access to prompt payment for medical services or lost wages if they are injured while working on the job, and employers get legal protection. On the flip side of that, employees forfeit the right to sue if they take workers compensation and employers need to pay for the coverage. Ensuring the safety of your employees should always be the top priority, so invest in effective worker compensation that keeps your workforce covered. 

Martin Maina
Martin Maina is a professional writer and blogger who uses his expertise, skills, and personal experience in digital marketing to craft content that resonates with audiences. Deep down, he believes that if you cannot do great things, then you can do small things in a great way. To learn more, you can connect with him online.
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