The Application of Workers’ and Unemployment Compensations

The Application of Workers’ and Unemployment Compensations

Abstract

The welfare of employees is among the most important things that all employers need to consider. This has created a rise in different types of compensation programs and employee benefits. This paper review various concepts relating to worker’s compensation and unemployment compensation. The discussion in the paper focuses on the definition of these two types of compensation, who they apply to, when they apply and how they apply.

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Part 1: Workers’ compensation

What is workers’ compensation?

Worker’s compensation is mainly defined as a grand bargain between employers and employees. It includes the provision of defined benefits for covered illnesses, deaths, and injuries without considering liability or fault (Terrell, 2013). Employees are, in turn, prohibited from suing their employers for workplace deaths, injuries, and illnesses. Worker’s compensation is, therefore, considered to be the exclusive remedy that employees can use. Employers are able to buy insurance to reduce their financial risks and increase the predictability of costs.

Who does it apply to?

Worker’s compensation applies to all employed individuals and their families. While workers are connected to the compensation by receiving compensation for deaths, illnesses, and injuries that occur in the workplace, families are connected by the fact that they are not allowed to sue employers to recover any cost related to suffering or pain or to demand punitive damages for illnesses, deaths, and injuries that occur (Moore & Viscusi, 2014). Employees may sue third parties that may be responsible for their deaths, illnesses, and injuries. In such instances, the employer has a right of subrogation and can recover from what they are awarded by the third party. The special nature of the worker’s compensation remedy does not prevent all cases from getting to court. In some instances, decisions of administrative bodies can be appealed to state courts. Some workers also sue their employers by claiming that their injuries were caused by the acts of an employer or their failure to act as required, such as providing protective material. Such cases may become intentional torts that are required to be ruled by a court without eligibility for compensation. Worker’s compensation does not cover two groups of employees who are entitled to use the tort system to recover damages arising from occupational illnesses, injuries, and deaths (Moore & Viscusi, 2014). Employees working in railroads are exempted from worker’s compensation because they are covered by the Federal Employers’ Liability.

When does it apply?

Worker’s compensation applies when employees are injured at the workplace because the injured employees are entitled to medical benefits under the laws of worker’s compensation. An employee who is sick or injured as a result of employment-related exposure or incident is given medical coverage for his or her covered illnesses or injuries (Larson & Larson, 2013). The worker’s compensation systems have unique provisions for medical care. In some systems, such as federal systems, workers have a lot of control over which medical providers they select for care. In other systems, employers have a higher role in affecting the choice of healthcare providers, either by selecting providers for patients or putting restrictions on patients to select providers from a list provided by the employer (Larson & Larson, 2013). Many workers’ compensation systems in various states allow pharmacy benefit managers to utilize formularies and reviews to control the utilization of prescription drugs and economies of scale to control the purchasing cost of prescription drugs. Worker’s compensation pays cash benefits to employees for disabilities due to workplace illness and injuries and to the families of workers who die due to their employment. The main intention of cash benefits is to replace a part of wages lost by the deceased or disabled worker.

Disability benefits in the worker’s compensation are paid when a covered employee is unable to work at his or her full earning capability, normally at his or her suitable or previous job provided by his or her employer, because of an injury at the workplace. Disability benefits can either be partial or total disability and can also be permanent or temporary. Total disability benefits are mainly paid at two-thirds of the pre-disability wage provided to employees. Partial disability benefits are paid as a fraction of the total rate of disability that corresponds to the partial earning capability of an employee. The evaluation of an employee’s capacity to work is mainly done by applying the American Medical Association Guides to the Evaluation of Permanent Impairment (Larson & Larson, 2013). Permanent disability benefits are paid after ascertaining that the medical condition of a worker is not going to improve favorably to allow the worker to return to work to full earning capacity. In most instances, disability benefits are not paid until the permanence of a condition is determined. If an employee dies while in employment or due to an illness or injury arising from the workplace, his or her family is entitled to worker’s compensation benefits. The benefits are provided in monthly installments equivalent to the worker’s monthly disability benefit (Larson & Larson, 2013). Only dependent children, spouses, or other dependent family members are eligible for the benefits because the benefits are intended to replace the income that was lost and initially used to support dependents. Benefits usually stop when the dependent children reach adulthood or when the spouse remarries. When there are no surviving dependents or spouses, the benefits are not paid. The system further provides a separate burial allowance or benefit when there are covered deaths. This benefit is usually provided in lump-sum to partially meet funeral costs or other financial expenses related to the death. This benefit is paid even in instances where the worker has no dependents or spouse.

How does it apply

Employers finance worker’s compensation by purchasing insurance. The employers pay premiums to cover the insurance policies. Insurance premiums are controlled by the state. The premiums are affected by the risk associated with the specific types of jobs being insured and the experience rating of an employer. The rating is based on his or her past insurance losses and history of claims. They can serve as an incentive for the employer’s implementation of occupational safety and health practices to reduce illnesses and injuries.

Part 2: Unemployment compensation

What is unemployment compensation?

Unemployment compensation refers to the monetary compensation provided by the state to unemployed individuals who have lost their jobs because of retrenchment or layoffs. This type of compensation focuses on providing a source of income for jobless workers until they get employed (Beer & Schils, 2010). Eligibility relies on specific criteria that ought to be met, such as having been employed before for a minimum required time and actively applying for jobs.

Who does it apply to?

The unemployment compensation applies to unemployed workers who have lost a job due to circumstances that were beyond their control, unemployed workers who have the capacity to work, are free to work, and are actively looking for jobs, as well as unemployed workers who have earned a specific amount of money within a recommended period before losing their jobs (Beer & Schils, 2010). States have different systems of applying these criteria. For instance, some states do not compensate part-time employees unless they are ready to work on a full-time basis, while some allow part-time employees to get compensated even though they are looking for another part-time job. Beer & Schils (2010) argue that unemployment compensation acts as social insurance in which taxes paid by employers are added to the scheme on behalf of those in employment to give them income and sustain demand throughout an economic crisis by maintaining a continuous flow of money for families.

When does it apply?

The unemployment compensation applies during downturns and when the unemployment rate is high. The federal government creates short-term programs that are fully funded by the federal government. Some states may also provide supplementary benefits under distinct programs funded by the state. Short-term federal programs used during downturns are fully funded by the federal government (Beer & Schils, 2010). However, the depth and length of the economic crisis after the Great Depression created serious solvency issues in most unemployment compensation programs in different states.

How does it apply?

The unemployment compensation program is implemented by states and is supervised by the United States Department of Labor. The basic program is applied for up to 26 weeks, replacing about half of the wages they were earning. States offer most of the funds needed and pay the definite benefits provided to employees while the federal government meets administrative costs. Most unemployment compensation programs are applied using the permanent Extended Benefits program that offers an extra 20 or 13 weeks of compensation to unemployed workers who have drained their regular benefits in states where joblessness is high (Beer & Schils, 2010). The total number of weeks selected is dictated by the state’s unemployment rate and unemployment insurance laws. In most instances, the states and federal government split the Extended Benefit cost. However, the Recovery Act that was passed in 2009 authorized temporary full funding from the government. This continued until 2013, after which states were allowed to dictate their terms.

References

Beer, P. D., & Schils, T. (2010). The labor market triangle: Employment protection, unemployment compensation and activation in Europe. Edward Elgar Publishing.

Larson, L. K., & Larson, A. (2013). Workers’ compensation law: Cases, materials, and text. LexisNexis.

Moore, M. J., & Viscusi, W. K. (2014). Compensation mechanisms for job risks: Wages, workers’ compensation, and product liability. Princeton University Press.

Terrell, P. (2013). Workers’ compensation. Encyclopedia of Social Work. https://doi.org/10.1093/acrefore/9780199975839.013.418

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Workers’ compensation and unemployment insurance statutes are a part of virtually every state’s statutory safety net for injured and out-of-work workers. You are a human resource manager. A new employee needs an explanation of workers’ compensation and unemployment. In an inter-office memorandum, define and explain what workers’ compensation is for the new employee.

Divide the internal report into 2 parts. In Part 1, explain workers’ compensation. In Part 2, discuss and explain unemployment compensation. Explain the following to the new hire in a minimum of 5 pages:

Part 1: Workers’ compensation
What is workers’ compensation?
Who does it apply to?
When does it apply?
How does it apply
Part 2: Unemployment compensation
What is unemployment compensation?
Who does it apply to?
When does it apply?
How does it apply?