Workers’ Compensation Eligibility

To receive workers’ compensation insurance benefits, employees must meet eligibility requirements. These requirements include the worker’s employment status, the business owner’s workers’ comp requirements, the nature of the injury or illness, and the employee’s cooperation with filing deadlines. Meeting workers’ compensation eligibility requirements helps minimize the chance of a claim being denied.

1. The Worker Must Be an Employee

The first eligibility criteria for workers’ compensation is that the injured person must meet the legal definition of an employee for the business. Every state defines what an employee is in its laws, with most describing an employee as anyone who enters into a work agreement, oral or written, with a business, including minors and foreigners. While some states exempt certain part-time employees, others do not take the number of hours worked into account.

What Employees Might Be Exempt

Even when a business has workers that fit the state’s definition of employee, they may not have to include those employees on their workers’ comp policies. This is because states often have a list of exempt employees. These vary from state to state, but there are common exemptions worth noting, such as:

• Sole proprietors, partners, and corporate officers
• Domestic employees like nannies and personal assistants
• Independent contractors
• Employees paid by commission only like real estate agents

It is important for business owners to review state workers’ compensation laws to determine if a potential new hire meets the definition of an employee. That way, they can avoid workers’ compensation penalties for noncompliance. If in doubt, talk to your workers’ compensation insurance provider for guidance.

Employee vs 1099 Worker

Knowing the difference between employees and 1099 workers is essential for identifying who is eligible for workers’ compensation benefits. Employees are on the business’ payroll and receive a regular paycheck with taxes withheld plus a Form W-2. An employer controls an employee’s duties, designating what tasks the employee needs to do as well as when, where, and how those tasks should be completed.

Independent contractors, also called 1099 workers, are technically self-employed and can work for multiple companies at the same time. A business may contract with an independent contractor to complete certain tasks within a time frame, but the independent contractor decides what’s the best way to get the work done.

Unfortunately, sometimes employers try to avoid employment taxes by designating employees as independent contractors. Not only can they be fined for this, but their actions mean some employees may not get the workers’ compensation benefits they deserve. If you have questions about whether a worker is an employee or an independent contractor, you can use the three common law rules provided by the IRS as a guide. However, be sure to check with your state workers’ compensation department too.

2. The Employer Must Be Required to Carry Workers’ Compensation Insurance

Not every employer is required to carry workers’ compensation insurance based on their state laws. Some states require anyone with even one part-time employee to have workers’ comp insurance while others, such as Tennessee, only mandate businesses with at least five employees to carry a policy. Additionally, state workers’ comp laws do not apply to employees of the federal government. They are covered by the federal workers’ compensation program.

Check with the state’s local workers’ compensation board to determine whether or not your employer is required to have a policy.

What Happens If My Employer Doesn’t Have Workers’ Compensation Insurance?

Businesses can be held liable for their employees’ injuries, so they get workers’ compensation insurance to cover that liability. If an employer doesn’t have coverage, then injured employees can usually file a lawsuit seeking compensation. This is true if the business is noncompliant, meaning it’s supposed to have coverage and doesn’t, or if the business is exempt from carrying workers’ comp altogether.

Some states also have an uninsured employer’s fund. This gives injured workers another path for getting compensation for their lost wages and medical bills without having to gamble on a lawsuit.

3. The Illness or Injury Must Be Work-related

To be eligible for workers’ compensation insurance, an employee must have experienced a work-related injury or illness. In most states, an injury or illness is work-related if it occurs during the course and scope of the worker’s employment. More simply put, the worker must be doing something for the benefit of the employer at the time of the injury. This means a few common situations are not covered by workers’ comp, such as injuries caused by:

• Disregard for safety rules and protocol
• Self-harm
• Illegal activities
• Horseplay

Every state views workplace injuries a little differently. Employees should review the state laws to determine if they are eligible for workers’ compensation insurance benefits.

Injuries at Work vs Work-related Injuries

There is a difference between injuries at work and work-related injuries. An injury at work happens on the premises or during work hours but isn’t connected to the employee’s job duties. For example, if an employee pulls a muscle while exercising on her lunch break, workers’ comp most likely doesn’t apply because her activities were not for her employer’s benefit. Meanwhile, a work-related injury is one where the employee’s injury arises for his employment like a warehouse worker hurting his back while moving a box.

When Are Off-premises Injuries Covered?

An injury or illness may be covered even if it’s incurred off-premises. Take service workers, such as plumbers, electricians, and heating, ventilation, and air conditioning (HVAC) technicians, who work on third-party premises like the client’s location. If an employee is injured off-premises, then workers’ compensation coverage goes into effect. The same is usually true if the employee is injured in a car accident while traveling to the client’s property.

Remote employees may also be covered for work-related injuries. For example, say a remote worker keeps inventory in their garage and trips over a box while preparing for a meeting. Her injuries may be covered by workers’ compensation. The same is often true for employees who are required to travel for work. Injuries that occur during a business trip typically are covered. There have been examples of employees injured in hotel rooms after business hours that won their claims for workers’ compensation.

4. The Employee Must Meet the State’s Deadlines

Every state has a statute of limitations that restricts how long after an injury that an employee can make a workers’ comp claim with the appropriate agency. These tend to be around one to three years. When it comes to an illness, the statute of limitation usually starts with the onset of symptoms. Failure to meet the statute of limitations often means the employee is no longer eligible for benefits.

The statute of limitations is not the only deadline. State law often requires the employee to notify the employer immediately when an incident happens, and many add a specific time limit. A few also require the notification to be in writing. Failing to meet that time limit can impact the employee’s benefits. Additionally, employees whose injuries have worsened usually have a limited time to reopen their cases, which is typically around three to five years.

Bottom Line

For the most part, eligibility for workers’ compensation seems pretty straightforward. The injury has to be work-related and occur to an employee of a business that’s required to carry coverage. Then, as long as deadlines are met, the employee should be able to collect benefits. However, things can get complicated when you look at the details. Employers and workers should review their state’s laws before an accident happens to make sure employees receive the compensation they deserve.