What is a Workers Compensation Settlement

by News Guy on December 7, 2011


Workers’ compensation is a topic that too many employees don’t know enough about.

People often ask, what is a workers compensation settlement? It is simply an agreement between an injured employee or dependents on a claim for workers’ compensation from an employer.

The agreement, which may also be known as a workman’s compensation settlement is typically between the employee and the employer’s workers’ compensation insurer, may call for periodic payments or payment in a lump sum.

Why Its Important

Understanding what a workers compensation claim is will help in understanding what the settlement entails. Depending on the person’s occupation, if a worker is injured while on the job, the worker may present a claim for workers compensation to the employer. This is no-fault coverage.

All states have some form of workers compensation law, though what is paid may differ among states. However, here are forms of compensation common to most states.

Medical Expenses

If the employee incurs medical expenses due to an on the job injury, the employer, or the employer’s insurance company, will be required to pay the medical expenses. At times, the employer may choose the medical provider.

If the employee is not satisfied with the medical treatment, some states provide the employee the ability to seek a second opinion. This is usually done through the state’s worker’s compensation office. In some cases of permanent injury, the case may provide that the employee may seek reimbursement for necessary medical expenses in the future.

Lost Wages

If the employee has missed work due to the on the job injury, the employee is usually paid a portion of their lost wages. The amount paid may be a percentage of the employee’s wages (typically about 60%), or on a schedule set by state law. There is often a maximum period for an employee to collect lost wages.

Permanent Injury

Often, the injury suffered results in some type of permanent injury. A shoulder or back injury, for example, may never fully heal. These type of injuries are handled in a number of ways. Some times injuries are listed in state regulations that will set a specific amount of disability based on the severity and nature of the injury.

In other cases, the permanent injury must be determined to cause the employee to lose the ability to perform certain job functions. If a back injury limits a construction worker to lifting no more than 20 lbs., the worker’s ability to perform the functions of that job will be compromised. The employee will seek compensation based on his or her disability rating and decreased earning capacity.

Permanent injury compensation is usually paid based on the 1) weekly wage the worker was earning at the time of the injury 2) the severity of the injury based on a percentage of disability and 3) a number of weeks or years, usually set by the state, for the compensation to be paid.

The weekly wage is multiplied by the percentage of disability, which is then multiplied by the time set by law for payment of permanent injuries. It may be paid on a weekly basis, or in some cases, in a lump sum.

The Workers Compensation Settlement

The employer may often dispute the severity of the injury, whether it is permanent, or whether it was incurred on the job. In those cases, medical evaluations are usually conducted, along with depositions and hearings. If the parties can agree, a settlement will be reached.

This is the basic format of what is a workers compensation settlement. Claims vary based on their facts and the state in which the worker resides.

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