What Should You Do If Your Employer Opts Out Of State Workers Compensation?

If you work as a W2 employee, you probably don't give much thought to type of workers compensation coverage your employer purchases. However, a recent set of Oklahoma workers compensation cases have illustrated the potential dangers of having a workers compensation program administered outside the state coverage guidelines. How can you determine whether your employer complies with state laws governing workers compensation -- and what should you do if you determine that your employer's coverage could be inadequate? Read on to learn more info about workers compensation exemptions and steps you can take to ensure that you are adequately protected from workplace injuries.

When can employers choose not to abide by state workers compensation guidelines?

Most states operate a central workers compensation exchange, providing coverage (through an insurer) for all registered businesses and other corporate organizations in the state. Workers compensation is a type of insurance that covers lost wages and medical expenses if an employee is injured while on the job. Many state workers compensation laws often have narrow exemptions, which can allow employers to skirt the required purchase of workers compensation coverage in certain situations.

However, there are several states that have passed additional legislation permitting employers to opt out of the state workers compensation exchange if they agree to seek and purchase an alternative plan that provides similar benefits to employees as the state-sponsored coverage. In Oklahoma, one of the states that permits opting out, employers must seek approval from the state's insurance commissioner (who determines whether the plan complies with state law) before purchasing coverage.

The extent to which certain plans comply with state coverage laws or the state-provided benefits can be a matter for debate. In the Oklahoma cases, which are still pending, workers argued that provisions of their employers' alternate plans caused them actual harm. In one case, a plan denied benefits when the employee failed to report the injury to his supervisor before the end of the shift; in another case, the employee argued that the plan was unconstitutional because claims were adjudicated by a committee, rather than an administrative law judge. However, both these plans had been approved by the state's insurance commissioner as providing sufficient coverage under state law.

This shows that even if your employer's plan has been approved as a suitable alternate to the plan instituted by your state, it may not be enough to cover a potential claim. You may want to investigate your employer's coverage and any specific provisions that could cause you to void coverage (such as the requirement that you report an injury to your supervisor before leaving your shift).

What should you do if you're worried about your employer's coverage?

If you've discovered that your employer's plan may not provide adequate coverage for injuries, you have a couple of options.

First, you can purchase independent short- and/or long-term disability coverage. These types of insurance operate independently from other coverage (including health insurance and workers compensation) and will help cover any lost wages or other non-health costs resulting from an injury. In many cases, you'll need to submit to a physical exam before coverage can be offered.

Next, you may be able to file a lawsuit or injunction to attempt to force your employer to purchase sufficient workers compensation coverage. However, in order to file such a lawsuit, you'll need to have "standing" -- meaning that you'll need to be someone who has suffered (or is certain to suffer) actual harm due to your employer's decision to opt out of state coverage. If you haven't personally suffered an injury subject to workers compensation, you'll need to find someone who has in order to file a lawsuit.