Awards to Employees Workers' compensation rules generally provide that the employee can recover only the cost of medical treatment and lost wages. In some serious cases, the injured workers can collect an amount to compensate for his or her impaired future earning capacity. While workers' compensation laws prevent the collection of damages for pain and suffering or mental anguish, many recent successful workers' compensation claims are based on job related mental or emotional stress. Each state establishes what an employer must do to provide adequate workers' compensation benefits. In most cases, the employer is required to purchase workers' compensation insurance.
Many small businesses buy insurance through a state fund or from a private insurance carrier.
The insurance premiums are usually based on factors such as the industry, the types of jobs involved, and the size of the payroll. Businesses do not need to purchase workers' compensation coverage for true independent contractors. If you are a sole proprietor, you probably are not covered by your workers' compensation insurance. Workers' compensation coverage of partners and officers of small corporation is not normally necessary, but it can usually be purchased if desired. While it is not necessary for the small business owner to know every workers' compensation rule, care should be taken to work with an insurance agent who is familiar with the local laws.