Work Comp for Small Businesses: 3 Reasons It’s Important

Employees are expensive, and not just in terms of their wages or salaries. As of June 2024, the Bureau of Labor Statistics says employers spend an average of $3.23 per hour per civilian worker in legally-required benefits, including workers’ compensation. Small business owners may wonder whether all these costs are necessary – at least in the case of workers’ compensation insurance. Nevertheless, there are three reasons why it’s important for small businesses to carry workers’ compensation insurance.

Reason#1: It’s the law.

Texas is the only state that does not require workers’ compensation. In Texas, most private employers do not need to maintain workers’ compensation insurance, with the exception of those that contract with government entities.

In all other states, most employers must carry workers’ compensation insurance. This may not be a requirement for companies with very few employees, but in some states – like California, for example – even employers who have only have one employee must have workers’ compensation insurance. Oregon requires almost every employer to carry workers’ compensation insurance. In Washington, even businesses with independent contractors may need to provide workers’ compensation insurance.

Employers that break the law may face stiff penalties. For example, Oregon charges a penalty of twice the amount of premium you should have paid, with a minimum of $1,000 for the first offense. If the employer continues to go without coverage, the penalty increases to up to $250 per day for each additional day of noncompliance after the first order – and there’s no upper limit. Continued defiance could lead to other penalties, including jail time. It’s clearly less expensive to just buy workers’ compensation insurance.

Reason#2: Injuries may happen in any industry.

Some employers may think the workers’ compensation insurance requirements are unfair because their workers aren’t likely to suffer an injury, but the reality is that injuries may happen in any industry. Even office workers may suffer injuries.

The following are some common types of injuries:

• Carpal tunnel syndrome. Repetitive hand movements (including typing) may lead to carpal tunnel syndrome. Your workers may be able to file a workers’ compensation claim for this condition.
• The National Safety Council says 865 workers died in falls in 2022, including 144 workers who didn’t even fall from a height. Hundreds of thousands of other workers were injured badly enough to miss days of work. Your employees could slip on a wet floor or trip over an item left in a hallway.
• Car crashes. The National Safety Council reports that the costliest lost-time workers’ compensation claims are due to motor-vehicle crashes. If driving is a major part of your workers’ jobs, you likely understand that car crashes are a risk. However, even if driving is not the main part of the job, your workers could be exposed to on-the-job crashes – for example, if they occasionally drive to pick up supplies or go to an off-site work event.
• If your workers deal with the public, violence is unfortunately always a risk. Alternatively, a worker could be attacked by a coworker.

You may still argue that the risk of a large workers’ compensation claim is low for your workers, which may be true. However, if your risks are low and your loss history is good, you’ll pay less for workers’ compensation insurance.

Reason #3: Workers’ compensation protects employers from lawsuits.

Injuries are catastrophic for employees who lose their health and their livelihood. Workers’ compensation provides important protection by enabling them to claim medical bills and lost wages caused by work-related illnesses and injuries.

However, that’s not it’s only purpose – workers’ compensation also protects the employer by providing an exclusive remedy.

The exclusive remedy shields employers from most lawsuits involving employee injuries and requires employees to resolve any issues through the workers’ compensation dispute resolution process. Employment-related litigation can easily cost six-figures, so the exclusive remedy provides a significant advantage.

Do You Need Workers’ Compensation Guidance?

Heffernan Insurance Brokers provides workers’ compensation insurance throughout the nation for both small employers and large, multi-state entities. We can help you navigate the rules and find the most cost-effective options. Contact us to learn more.