by Reuben Dourte
Workers’ compensation insurance is a subject that is dreaded by many agricultural businesses, and for good reason. First, carrying workers’ compensation insurance is a mandate in every state. That means that qualifying farmers don’t have much “choice” as to whether or not they purchase this coverage.
Secondly, very few insurance companies offer workers’ compensation programs for agricultural employers, making coverage outside of a state fund often hard to find. Since laws can vary from state to state, its hard to be all-inclusive when discussing Workers’ Compensation, so it should be noted that it is important to consult with a licensed insurance agent in your home state before making decisions about your insurance plan.
Workers’ compensation insurance arose out of the need for injured workers to have some sort of restitution in the event that they were injured on the job. Before workers’ compensation laws, injured workers were often left without the means to provide for their families or receive medical treatment.
It’s important to note that the laws in most states are written to be compensatory in nature, meaning they are designed to pay an injured worker for both wage loss and medical expenses, regardless of fault. What this means is that a worker who makes a bad decision while on the job, or does something that their employer has warned against, can still collect benefits under their employer’s workers’ compensation policy. Common law establishes that in exchange for the employer agreeing to pay for workplace injuries, regardless of fault, the employee gives up the right to sue their employer in the event they are injured. The employee’s compensation is limited to wage loss and medical expenses, or their “sole remedy”.
Each state has different laws in regard to situations where an employer can be sued, but these situations become very limited when the employer is compliant with workers’ compensation laws and therefore receives the aforementioned Common Law defenses. It’s important to note that non-compliant employers who don’t carry worker’s compensation policies give up these common law defenses and expose themselves not only to the cost of personally paying for injured workers’ wage losses and medical expenses, but also to negligence lawsuits brought by the injured employee(s). Additionally, many states issue fines for non-compliance and, depending on the level of the infraction, an employer could be charged with a misdemeanor, or felony, for not carrying a workers’ compensation policy.
In some states, like Pennsylvania for example, agricultural employers wrongly believe they are exempt from workers’ compensation laws. States that have agricultural exemptions have strict guidelines that must be met by an employer. Keeping with our Pennsylvania example, there is a specific payment threshold that cannot be exceeded per employee; per year and/or a maximum number of days any one employee can work per year. If you think your farm qualifies for that exemption, it is imperative you discuss this in detail with your insurance agent to make sure you remain compliant.
In states with this exemption, farm insurance companies will often offer coverage called Farm Employer’s Liability, which will protect you in the event that one of your employees claims your negligence directly caused them injury during employment. This is not a substitute for worker’s compensation, which pays regardless of fault; however, it is an important coverage to include on your policy if you employ seasonal labor.
Remember, open and honest discussions with your agent are always the first place to start when determining workers’ compensation compliance in the state in which you do business.
Because specific details can vary between state jurisdictions, this article is for discussion purposes only, should not be construed as legal advice for situation specific circumstances, and employers should consult the worker’s compensation laws and a licensed insurance agent in their home state before making decisions about their coverage.