Almost every business in the United States that has employees has to handle the issue of workers’ compensation. Most states (with a few important exceptions) essentially require employers to purchase an insurance policy to handle their statutory obligations to workers who are injured or made ill due to a workplace exposure. Whether your business is small or large, managing the expense and effort of meeting those statutory obligations is an ever-present challenge.
Workers’ compensation laws provide fairly comprehensive and specific benefits to workers who suffer workplace injury or illness. Benefits include medical expenses, death benefits, lost wages, and vocational rehabilitation. Failure to carry workers’ compensation insurance or otherwise meet a state’s regulations in this regard can leave an employer exposed not only to paying these benefits out of pocket, but also to paying penalties levied by the state.
Who needs workers’ compensation insurance? That may be the first important question that a business needs to answer, because not every business is required to purchase workers’ compensation insurance.
A general rule is that if you have employees who aren’t owners of the company, you probably need workers’ compensation Insurance.
Buying Workers’ Compensation in New Jersey
Who needs to be covered by the policy, where you can buy it, and how much it will cost are all mandated or influenced by state law. Your business must comply with the states where your employees perform work – not necessarily where the business was founded or is based. If your business operates in multiple states, or employees travel across state lines to work, you may need to modify your policy to guarantee coverage in the event of a claim.
The following employing entities must have workers’ compensation Insurance in effect:
- Corporations – All corporations operating in New Jersey must maintain workers’ compensation insurance or be approved for self-insurance so long as any one or more individuals, including corporate officers, perform services for the corporation for prior, current or anticipated financial consideration.*
- Partnerships/LLCs – All partnerships and limited liability companies (LLCs) operating in New Jersey must maintain workers’ compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding partners or members of the LLC, perform services for the partnership or LLC for prior, current or anticipated financial consideration.*
- Sole Proprietorship – All sole proprietorships operating in New Jersey must maintain workers’ compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding the principal owner, performs services for the business for prior, current or anticipated financial consideration.*
*Financial consideration means any remuneration for services and includes cash or other remuneration in lieu of cash such as products, services, shares of or options to buy corporate stock, meals or lodging, etc.
• DEFINITION OF “EMPLOYEE”
The New Jersey Workers’ Compensation Act is liberally interpreted with respect to the definition of “employee” and is broader than the Internal Revenue Code and Unemployment Compensation statute. A variety of working relationships have been determined to be that of an employer-employee, including some that would not appear to be a typical employment situation. Further, a contract or other agreement as to whether an individual is an employee is not binding in determining whether an employee–employer situation is present.
• WHAT A WORKERS’ COMPENSATION POLICY COVERS
A workers’ compensation policy covers the following:
For injured employees:
- Reasonable medical services necessary to treat the job injury or illness
- Temporary disability benefits to help replace lost wages up to statutory maximum
- Permanent disability benefits to compensate for the continued effects of the injury
- Burial and death benefits for dependents in cases of fatal injury
- Coverage of financial liabilities for work-related injuries and illnesses
- Legal representation