How Does the Workers’ Compensation System Work?

The N.C. Workers’ Compensation system is a mystery to many employees and employers. Since it is a large topic, this article will address the basics. More information about how the law applies in your case can be obtained by consultation with Ms. Steffan or another attorney.

Where did the Workers’ Comp Act come from?

The N.C. Workers’ Comp Act was adopted in the 1930s to compensate employees who were injured by accident on the job or who contracted occupational disease. The purpose was “for industry to pay for its own wreckage,” in the words of a famous case. The legislature struck a balance between employers and employees. It gave employers the benefit of reduced expense on liability by (1) setting compensation rates at 2/3 of the employee’s average weekly wage instead of 100%, (2) excluding compensation for pain and suffering, and (3) making workers’ comp the “exclusive remedy” for employees, meaning that employees cannot usually sue their employers in court for workers’ comp injuries. It gave employees the benefits of (1) receiving disability benefits promptly in accepted cases, with those payments continuing weekly as the case goes on, (2) receiving medical care at no cost to the employee in accepted cases, and (3) eliminating the defense of contributory negligence. By comparison, in car wreck cases, the insurance company does not have to pay for lost income or medical bills until they settle at the end of the case. In addition, if the insurance company in a car wreck case can prove that the injured party contributed in any way to his own injuries (contributory negligence), the injured person recovers nothing. However, in a car wreck case, the claimant who proves his damages receives 100% of his lost income (rather than 2/3) and recovers for past and future pain and suffering.

What if the insurer denies the claim?

Unfortunately for the employee, denial means the employee receives no benefits (either weekly checks or medical care) until the case is settled or litigated. If it cannot be settled, the N.C. Industrial Commission will have a hearing to decide if the case is properly a workers’ comp case.

Whom does the Workers’ Comp Act provide benefits to?

An employee is entitled to benefits when she is injured by an accident (defined as an unexpected event or unusual circumstance) while on the job. It also applies to an employee who contracts a disease that is associated more with her type of work than with ordinary activities of the general public (e.g., keyboard operators who get carpal tunnel syndrome). In some cases, protection can extend beyond employees. In the construction industry, for instance, a general contractor’s workers’ comp insurance policy must cover subs’ employees, unless the sub has a policy of its own.

Which employers must carry workers’ comp insurance?

By statute, employers with three or more employees must carry workers’ comp insurance. This is true whether the employees are full-time or part-time. The owner does not have to count herself as an employee. However, if the business has workers’ comp insurance, the owner can choose to be covered by the policy.

Does Workers’ Comp provide medical coverage?

Yes, the employer’s workers’ comp insurance carrier must pay for the employee’s medical care for injury by accident or occupational disease. This is true whether the employee misses work or not. The employer can direct the employee to see a particular doctor. However, as the case proceeds, the employee has the right to be evaluated by a doctor he chooses.

Does the Act replace lost wages for time out of work while the employee is receiving medical care?

The Act provides temporary disability benefits as follows. The insurer pays the employee weekly checks equal to 2/3 of her average weekly wage while out of work on doctors’ orders. The first 7 days the employee misses work are the “waiting period” when no check issues. Checks issue each week thereafter. Once the employee has missed work 21 days, the insurer pays the “waiting period” check. If an employee can return to part-time work while healing, she receives a partial Workers’ Comp check and a part-time paycheck.

When medical care has finished, is there compensation for permanent disability?

Yes. The employee has options from which to choose. These include: (1) a calculation based on the medical disability rating, or (2) a “wage loss” approach to account for a lower post-injury wage. In addition, if both sides of the case agree, they can settle a case in full, without the right to re-open the case later, in exchange for an extra payment; this is called a “clincher agreement.”

Once the case is settled, can the employee re-open the case for more medical care or for additional compensation if his condition worsens?

This depends on how the case was settled. If the case was settled with a clincher agreement, it cannot be re-opened. If the case was settled without a clincher agreement, then the employee can usually re-open the case within two years of receiving his last check.

Must the employer allow the employee to return to work after the doctor releases the employee?

No, but the insurance company may face additional costs in the Workers’ Comp case if the employer does not offer work within the employee’s medical restrictions. It may extend the time that temporary weekly benefits are paid while the employee seeks other work. If the employee cannot find other work, this may result in additional permanent disability compensation. In some cases, there may be no choice about bringing the employee back to work, if the company does not have any jobs within the employee’s new medical restrictions.

Who decides disputed cases?

Disputed cases are decided by the Commissioners at the N.C. Industrial Commission. There are no jury trials in Workers’ Comp cases.

How are Workers’ Comp insurance rates set for employers?

Insurance rates are based on several factors. These include size of payroll, number of employees, and type of work the employer does. Of course, rates are higher in industries where injuries are more common, like construction. Since the economy began declining around 2001, insurance companies have seen their returns drop on money they had invested. Many insurers in the 1990s used their large investment returns to subsidize insurance premium rates in order to offer lower premiums and sell more policies. With those large investment returns gone, some insurers are raising their premiums instead. Since there are no juries in Workers’ Comp cases, premiums are not affected by jury verdicts.

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