Ch9. Workers' Compensation and Social Insurance — The Structure of America's Worker Safety Net

Four major programs protect workers from injury, illness, job loss, and old age.

Program	Purpose	Who Pays
Social Security (OASDI)	Retirement, disability, survivor income	Employee 6.2% + Employer 6.2%
Medicare	Hospital and medical coverage (age 65+)	Employee 1.45% + Employer 1.45%
Unemployment Insurance (UI)	Job-loss income replacement	Employer (FUTA 6.0%; state UI varies)
Workers’ Compensation	Work-related injury/illness compensation	Employer pays 100% of premium

Workers’ Compensation

Coverage

State workers’ compensation laws cover virtually all employees (not independent contractors). Most states require employers to carry workers’ comp insurance or qualify as self-insured.

Gig workers / independent contractors: classified as independent contractors are generally excluded, but misclassification is a growing litigation risk. Some states are expanding coverage.

Compensability Standard

Work-related injury: an injury arising out of and in the course of employment (AOE/COE).

Occupational disease: illness caused by conditions peculiar to the job (e.g., coal miner’s pneumoconiosis, repetitive-stress injuries, occupational cancer).

Going-and-coming rule: injuries during ordinary commuting are NOT compensable. Exceptions:

The employer provides the transportation
The employee is on a special mission for the employer
Travel is part of the job (outside sales, field service)

Core standard: the injury must have a causal connection to the employment — work need not be the sole cause, but it must be a contributing cause.

Types of Workers’ Comp Benefits

Benefit	Description
Medical benefits	All reasonable and necessary treatment (no deductible or co-pay for the injured worker)
Temporary total disability (TTD)	Wage replacement during recovery — typically 66.67% of average weekly wage
Permanent partial disability (PPD)	Scheduled or unscheduled awards for lasting impairment
Permanent total disability (PTD)	Lifetime wage replacement for catastrophic injuries
Death benefits	Burial expenses + partial wage replacement to surviving dependents
Vocational rehabilitation	Retraining costs when the worker cannot return to the same occupation

Workers’ Comp Claims Process

Injured worker reports injury to employer (typically within 30 days)
Employer files a First Report of Injury with the state workers’ comp board
Insurer accepts or denies the claim (typically within 14–21 days)
If accepted: treatment authorized + weekly benefits begin
If denied: employee may appeal to the state workers’ compensation board/court

Employer intentional misconduct or gross negligence: employee may bring a civil tort claim against the employer in addition to (or instead of) workers’ comp in some states.

OSHA (Occupational Safety and Health Act, 1970): requires employers to provide a workplace free from recognized hazards likely to cause death or serious physical harm, and to comply with OSHA standards.

General duty clause (§ 5(a)(1)): even where no specific OSHA standard exists, the employer must keep the workplace free from serious recognized hazards.

Injury Reporting

Fatalities: report to OSHA within 8 hours
Hospitalizations (3+ employees), amputations, or loss of an eye: report within 24 hours
OSHA 300 Log: maintain a record of all recordable work-related injuries and illnesses

Penalties

Serious violation: up to $16,550 per violation
Willful or repeated violation: up to $165,514 per violation
Retaliation against workers who report OSHA violations: prohibited; employee may file a retaliation complaint within 30 days

Unemployment Insurance (UI)

Eligibility Requirements

Worked during the base period (typically the first four of the last five completed calendar quarters)
Earned sufficient base-period wages (varies by state)
Separated from employment through no fault of the employee (layoff, reduction in force, constructive discharge)
Able and available to work; actively seeking suitable employment

Voluntary quit: generally disqualifying unless the employee had “good cause” (unreasonable working conditions, health/safety reasons, domestic violence, etc.)

Benefit Level

UI benefits typically replace 40–60% of prior average weekly wages up to a state-set weekly maximum.

Benefit duration: standard maximum of 26 weeks (federally during emergencies: extended to 39 or 52 weeks via federal programs).

Voluntary quit exception: employees who resign due to significant wage cuts, harassment, unsafe conditions, or forced relocation may still qualify in most states.

Reemployment Services

Unemployment insurance recipients are required to register for job placement services and use state workforce development resources (job boards, training programs, career counseling).

Basic Structure

Covered workers: virtually all employees and self-employed persons
Contribution rate: 6.2% employee + 6.2% employer on wages up to the annual wage base ($168,600 in 2024)
Full retirement age (FRA): 67 for workers born after 1959 (66 and some months for earlier birth years)

Benefit Types

Retirement benefit: monthly benefit beginning at FRA (or reduced benefit as early as age 62)
Disability benefit (SSDI): for workers who become disabled before retirement age
Survivor benefit: for the surviving spouse and minor children of a deceased insured worker

Credits: workers earn up to 4 “credits” per year based on earnings; 40 credits (10 years of work) qualifies for retirement benefits.

Medicare

Employer-Sponsored Health Insurance

ACA employer mandate: employers with 50+ full-time equivalent employees must offer qualifying health coverage or pay a penalty
Employee premium sharing: employer and employee typically split premium costs; 70–80% employer / 20–30% employee is common
COBRA continuation: employees leaving employment may continue employer-sponsored coverage for up to 18 months (at full premium + 2% administrative fee)

Medicare (Age 65+)

Part A (hospital): premium-free for most workers who contributed 40+ quarters
Part B (medical): standard premium of ~$174.70/month (2024); income-related adjustments apply

Voluntary continuation coverage: employees who lose workplace coverage before Medicare eligibility may elect COBRA or purchase ACA marketplace coverage.

Program	Employee Rate	Employer Rate
Social Security (OASDI)	6.2%	6.2%
Medicare (Part A)	1.45%	1.45%
Unemployment (FUTA)	0%	6.0% (credit up to 5.4%)
Workers’ Compensation	0%	100% of premium

Learning Checklist

I can state the purpose and payer for each of the four major US social insurance programs
I can explain the “arising out of and in the course of employment” standard for workers’ comp
I can describe the five types of workers’ comp benefits
I can list the three UI eligibility requirements
I can explain the Social Security contribution rate and full retirement age