What Is Workers’ Compensation Insurance?

Workers’ compensation insurance provides wage replacement and medical benefits to employees who have suffered a work-related injury or disease. The intent of Minnesota’s Workers’ Compensation statute is to “assure the quick and efficient delivery of indemnity and medical benefits to injured workers at a reasonable cost to the employers…” For purposes of workers’ compensation insurance, employees are generally defined as people performing services for another for hire, and employers are generally defined as those who hire others to perform services.

Who is Required to Carry Workers’ Compensation Insurance?

Minnesota law states that all employers are required to purchase workers’ compensation insurance or become self-insured.

There are some exceptions to the rule, however, such as sole proprietorships, which are unincorporated businesses owned and run by one individual with no distinction between the business and individual running it. Therefore, since there are no employees to insure, sole proprietorships are not required to carry workers’ compensation insurance. As soon as a sole proprietor hires an employee, then insurance becomes required. Another example of when workers’ compensation insurance is not required is in a partnership where the partners in the business or farm are also the only employees, or any employee of the partnership is a spouse parent or child of a partner. Other examples of when workers’ compensation insurance is not required are closely held corporations, limited liability companies, family farm operations, casual employees (casual employee is the temporary worker whose employment is meant for one time or very infrequently), and household workers who earn less than $1,000 during the quarter of the year and work in a private household.

Consequences for Failing to Obtain Workers’ Compensation Insurance

Employers who fail to acquire workers’ compensation insurance can be fined up to $1,000 per employee per week as well as a prohibition against employing any new person. Further, if an employer fails to obtain workers’ compensation insurance after winning a construction, repair, or remodeling project, the losing bidder of that project may sue the winning bidder. Damages in that kind of suit could cover the amount of profit the winning contractor/employer expected to earn on the project in addition to court costs and attorneys’ fees.

What Injuries are Covered?

Any injury or disease that arises in the scope of employment should be covered by workers’ compensation insurance. Minnesota statute defines personal injury as “any mental impairment [such as diagnosis of post-traumatic stress disorder], or physical injury arising out of and in the course of employment and includes personal injury caused by occupational disease but does not cover an employee except while engaged in, on, or about the premises where the employee’s services require the employee’s presence as a part of that service at the time of the injury during the hours of that service.” Minn. Stat. § 176.011, subd. 16.

What Should Be Done If An Employee Is Injured?

It is the employer’s responsibility, and not the employee’s, to fill out a First Report of Injury form if an employee is injured. After the first report of injury is filled out, the employer must then give the employee the Minnesota Workers’ Compensation System Employee Information Sheet. This form must also be sent to the employer’s workers’ compensation insurer within 10 days. The Department of Labor and Industry must then get a copy from the insurance company. If an employer is self-insured, then they must report to the Department of Labor and Industry within 14 days.

Process to Return an Employee to Work

It is always recommended that employers bring back workers that have been injured as soon as possible. This may mean that employers have to make accommodations or modifying duties for an employee’s injury. Disability management programs can be used to help with this process and an insurance carrier can assist the employer in creating this program. Keep in mind, however, that if a union is involved, the employer should coordinate any return to work program with the union so the employer can avoid any applicable provisions in a union contract.

Is There a Way to Reduce Workers’ Compensation Costs?

Although it is difficult for the most part to reduce worker’s compensation insurance rates because they are adjusted by payroll risk classifications, there is still a way to help mitigate workers’ compensation costs. If the employer implements an accident prevention program it could lower worker’s compensation costs. Examples of this could include: developing wellness programs that emphasize fitness and health education, providing education on proper lifting techniques and body mechanics, having return to work policies and reasonable accommodations, and contacting the Department of Labor and Industry and requesting assistance on ways to improve workplace safety and health (this service is available to small private sector employers in high hazard industries).