The "exclusive remedy" provision of Workers' Compensation is basically a compromise between the employer and the employee. It states that if an employee is injured on the job, the benefits they receive from Workers' Comp for that injury is the only ("exclusive") compensation ("remedy") that will be given. This means that the employee can't sue the employer for additional compensation for that same injury.
Of course, in the real world, it isn't always so cut and dry. Exceptions exist, allowing an employee to sue for negligence, for example, but this depends on state law. Recent legislature in a few states has worked to strengthen or weaken the exclusive remedy doctrine.
Understanding how this rule works can help you navigate Workers' Compensation Insurance issues with your employees, so let's take a look at its history and how the exclusive remedy rule applies today.
A History of Workers' Comp and Exclusive Remedy
A little historical knowledge of how Workers' Comp came to be can help you better understand the goal of the exclusive remedy rule. (For more information, check out the Iowa Orthopaedic Journal's article "A Brief History of Workers' Compensation.")
Here are the highlights:
- Workers' Comp has ancient roots. Since written records have existed, there have been systems for compensating workers who've been injured on the job, from ancient Sumeria to Rome to China. In those days, the compensation largely depended on the type and severity of the injury, but legal avenues for seeking disability payment weren't available for the common worker.
- The Industrial Revolution was a bad time for workers. As the Industrial Revolution began to hit full steam, political parties in Europe began pushing for protection for the working class. By this time, the legal system had developed considerably and workers could sue employers (if those workers could afford to do so).
- Something had to give. Political pressure in Prussia resulted in the creation of the modern Workers' Compensation system in the mid 19th century. This system provided compensation for those injured on the job, but protected employers from being sued – a trade off that's now known as the exclusive remedy rule.
- Workers' Comp comes to the United States. In 1911, Wisconsin became the first state to enact Workers' Compensation laws and the exclusive remedy provision. Since then, every state has passed its own Workers' Comp law, and with it, their own exclusive remedy provisions.
For a brief look at each state's stance on exclusive remedy, see the American Bar Association's state-by-state survey [PDF].
Changes to Exclusive Remedy
Recently, lawsuits are challenging the protection that the exclusive remedy provides employers. A report by Business Insurance explores cases in Oklahoma, Florida, and elsewhere that may expose employers to more civil suits.
In some instances, states want to allow workers more legal options in cases of employer misconduct. Other states want to shore-up weakened or reformed Workers' Comp laws. Either way, a business can't rely on exclusive remedy alone to protect them.
Workers' Compensation Insurance provides compensation for when exclusive remedy holds up, and it can also provide Employer's Liability Insurance when it doesn't. Employer's Liability coverage can pay for legal expenses when an injured employee sues your business over negligence.
If you live in a state that's relaxing its exclusive remedy rules, you may want to talk to your insurance agent to ensure your Workers' Comp policy has adequate Employer's Liability coverage. In any case, your agent can help you understand your state's laws and how exclusive remedy works where you live.