Workers' Compensation


The term workers' compensation refers to laws that provide employees injured or disabled on the job with a monetary award.  Workers' compensation eliminates the need for employees to seek compensation through litigation.


Also referred to as workers' comp, workers' compensation laws require employers to carry insurance that provides eligible employees with benefits such as lost wages and payment of medical expenses.  The laws also require companies to provide compensation to dependents of employees that are killed in work-related accidents or die as a result of a work-related illness.  These same laws also protect employers by limiting the monetary awards paid to employees or their dependents.

Federal employees (non-military) are provided benefits under the Federal Employment Compensation Act.  This law provides benefits in cases of "disability or death" sustained by employees on the job.  Federal workers found to be intoxicated, or those that willfully cause injury or death, are not eligible for these benefits.

A disabled employee typically receives around two-thirds of their normal monthly salary during the disability, and may receive more compensation for permanent physical injuries or if they have dependents. The act also provides compensation to survivors of employees who die as a result of a work related-injury or illness. The act is administered by the Office of Workers' Compensation Programs.
State compensation laws differ, but generally provide eligible employees with lost wages equal to roughly two-thirds of their salary as well as death benefits for dependents.  Benefits may also include compensation for economic losses and reimbursement of medical costs.

Note:  Punitive damages for pain and suffering due to employer negligence are not typically covered by workers' compensation laws.

Related Terms

401(k) plan, disability insurance, COBRA, absenteeism, flexible benefits plan, flexplace, flextime, floating holiday, paid breaks, mandatory employee benefits, phased retirement, prescription drug plan, relocation services