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Understanding New Jersey’s Workers’ Compensation System

— Summary —
Since 1911, the New Jersey Workers’ Compensation law (N.J.S.A. 34:15-1 et seq.) has provided income and benefits to workers who become sick or injured on the job. This document provides general guidance to help businesses better understand the system in terms of benefits, insurance coverage, employer requirements, and controlling costs.

— Background —
All 50 states, the District of Columbia, and U.S. territories have Workers’ Compensation laws. Workers’ compensation provides wage replacement, medical treatment, and survivor benefits in the event a worker experiences a job-related accident or illness. In return, with some exceptions, both the employer and the employee give up the right to sue for negligence.

In New Jersey, all employers must have Workers’ Compensation insurance. This includes corporations and limited liability companies (LLCs) if at least one individual (including corporate officers) is paid to perform services for the business. Although large employers can fund their own Workers’ Compensation and be self-insured, the most common way employers get Workers’ Compensation insurance is through a private insurance company.

In the event of a job-related accident or injury, the employer’s insurance carrier, or the employer itself if it is self-insured, will investigate the claim and determine if an employee is eligible to receive Workers’ Compensation benefits. Workers who disagree with the determination can appeal to New Jersey’s Division of Workers’ Compensation.

— Employee Benefits under Workers’ Compensation —

What types of benefits does Workers’ Compensation provide?
Depending on the nature and severity of a workplace injury or illness, New Jersey’s Workers’ Compensation system provides workers with lost wages, medical treatment, and death benefits (to workers’ families.)

  • Lost Wages: If an injured worker is unable to perform their job due to a work-related injury or disease, but is expected to recover, they are entitled to temporary disability benefits, up to a maximum of 450 weeks (8 years, 8 months). These benefits are based on 70 percent of the injured worker’s gross average weekly wage, including overtime, commissions, tips, bonuses, etc., subject to a maximum and minimum rate every year. In 2021, the minimum is $258 and the maximum is $969. The injured worker may also be entitled to permanent disability benefits if there is a permanent impairment that restricts a function of the body up to and including total permanent disability.
  • Medical Treatment: The employer/insurance carrier has the right to direct the worker’s medical treatment. This means it can select the health care provider(s) to treat injured workers for work-related injuries and must provide all necessary medical treatment including artificial limbs, teeth, glasses, and anything reasonable and medically necessary to help the worker. The only exceptions to using the employer’s physicians for treatment are if: there is an emergency; the employer refuses to provide medical treatment; or, the employer instructs the injured worker to choose the doctor.
  • Death Benefits (also known as Survivor Benefits): If death results from a work-related incident or illness, the worker’s dependents are entitled to death benefits. Additionally, the worker’s medical and hospital expenses and burial are paid.

Are all workplace accidents and injuries automatically eligible for Workers’ Compensation?
Most workplace accidents or injuries will be eligible for Workers’ Compensation. There are only a few circumstances that would make an employee who gets sick or injured on the job ineligible. These include self-inflicted and intentional injuries; injuries sustained while attempting to injure another employee; intoxication; and deliberate violations of safety rules.

If an employee is injured on the way to work, are they eligible for Workers’ Compensation?
Generally, routine travel to and from work is not covered under Workers’ Compensation. In determining if an accident or injury is covered under Workers’ Compensation, a worker’s employment usually begins when they arrive at the place of business (which includes parking lots the employer owns and operates) and ends when they leave for the day. That said, there are some exceptions. If an accident, injury, or illness happens between two offices or job sites, it is usually covered. The same generally applies if a worker is directed to run a special errand on official business for the employer like picking up equipment or mailing something. (An errand like the worker picking up lunch for the office is typically not covered since it is not official business.) Lastly, certain jobs that require that workers continuously travel – delivery personnel, truck drivers, repairman, salespeople, and claim representatives – are usually covered by Workers’ Compensation while the worker is completing their regularly assigned duties.

Is an employee eligible for Worker’s Compensation benefits if they contract COVID-19?
In September 2020, Gov. Phil Murphy signed workers’ compensation legislation (S-2380) into law to address COVID-19 illnesses. The law created a rebuttable presumption that workers defined as essential employees who contracted COVID-19 did so as a result of work-related activity.

This workplace presumption was in effect until Governor Murphy signed Executive Order No. 244 on June 12, 2021 ending New Jersey’s public health emergency declared on March 9, 2020 under Executive Order No. 103. For more information, go to NJBIA’s Fast Fact document COVID-19 Workers’ Compensation Rebuttable Presumption.

How long must a worker be unable to work to qualify for workers’ compensation?
In New Jersey, there is a seven-day waiting period, during which time the worker must be unable to work. The waiting period begins the first day the injured worker is unable to continue to work due to the work-related incident or exposure. It includes weekends and holidays, regardless of whether the injured worker is scheduled to work. Once an employee is absent from work due to injury for seven days, payments are retroactive to day one.

Although the insurance carrier/employer can direct an employee’s medical treatment, is it still possible for the employee to be treated by their own physician?
If an employer/insurance carrier directs the employee to use a specific doctor or medical facility, but the injured worker goes instead to their own physician, the employee assumes all financial responsibility, even if the employee’s insurance plan exceeds the treatment.

How long does Workers’ Compensation last?
An injured worker can receive temporary disability benefits until they return to work, are released as able to return to work by the treating physician, or, have reached what is known as the maximum medical improvement (MMI). Maximum medical improvement means it is unlikely that the condition will be improved any further or that a plateau in the healing process has been reached. That said, temporary disability benefits cannot extend beyond 400 weeks.

Obtaining Workers’ Compensation Coverage

Are all employers eligible to purchase coverage through private insurers?
No. This could be because the company is a new business with no safety record, has a high number of accidents or injuries, or is in a very risky business or industry. These companies are placed in a state pool created by New Jersey’s Compensation Rating & Inspection Bureau (CRIB) and assigned to private insurance companies. The private insurance company must provide coverage for at least one year for the employer who is placed in a high-risk category.

How are premium rates calculated?
Premiums for workers’ compensation insurance are calculated using the formula below.
Classification Rate X Payroll (per $100) X Experience Modifier = Premium

  • Classification – Businesses are separated into groups according to the type of work they do. The classification system identifies which type of work presents more risk to the employees performing these tasks. (For instance, workers’ compensation costs will be more for longshoremen than office workers.) For each classification of employee, the business owner must pay a certain amount for workers’ compensation based on every $100 in payroll. The rate is applicable to the total policy payroll.
  • Payroll – As discussed above, for each $100 of an employer’s payroll, there is a specific rate, which is determined by the employer’s classification codes.
  • Experience Rating – The employer’s experience modifier – typically referred to as the MOD – is a numeric representation of the company’s claim experience. Employers with less severe accidents than others will pay less in workers’ compensation. Generally speaking, an employer’s lookback in determining the experience rating should only be about five years.

What can employers do to control rising premium costs?
Since the premium employers pay is based largely on their experience with claims, one of the most effective ways to control costs is through a management commitment to safety that includes employee training and voluntary safety inspections and audits. In the event of an accident, employers should work with their insurance carriers to direct medical treatment and conduct a thorough investigation to avoid future incidents. In addition, to reduce the length of a claim, many insurance carriers will encourage employers to offer temporary alternative duty assignments wherever possible so that the employee can return to work quicker than they would have if they had the same job duties prior to the incident.

Employer Responsibilities

What types of notices do employers have to provide about Workers’ Compensation?
New Jersey law requires every employer to post a notice in a public space about the availability of Workers’ Compensation. The notice must include the name of the insurance carrier and other items as required by the New Jersey Department of Banking and Insurance. To obtain copies of this notice, employers should contact their insurer.

Do employers have to hold the jobs of workers who are out on Workers’ Compensation?
In and of itself, New Jersey’s Workers’ Compensation law, N.J.S.A. 34:15-39.1, only prohibits the firing an employee in retaliation for filing a Workers’ Compensation claim or for testifying at a Workers’ Compensation hearing. That said, other laws that provide job protection may run concurrently, or at the same time, as Workers’ Compensation. These may include, but are not limited to, the federal Family and Medical Leave Act (FMLA), which provides 12 weeks of job protection. (See NJBIA’s Fast Facts document on Family Medical Leave for more information.)

What is the threshold for an employer reporting an injury? For instance, if an employer is made aware of an injury, but thinks the worker will recover on his own, should that still be reported?
All workplace accidents, injuries, and illnesses arising from the job should be reported as soon as possible. After an incident is reported, an employer’s workers’ compensation carrier will contact the injured worker and the employer to determine if a claim is compensable. If the claim is accepted, the carrier will direct the worker to a medical provider to decide if the incident is in fact a Workers’ Compensation claim. If the time out of work extends beyond seven days, they will also provide the injured worker with temporary disability benefits while they recover.

Do employers have to provide light duty to workers who want to return, even if none is readily available?
In New Jersey, employers are not required by law to offer light duty. However, if it is offered, and the employee’s doctor clears the employee to do the work, they must return to work or risk losing their benefits or termination. From the employer’s standpoint, offering light duty may mean providing the worker with reasonable accommodation for a disability. For instance, accommodating a lifting restriction by assigning that particular job function to another worker.

If no light duty is available, the worker will simply continue to receive disability benefits until they reach maximum medical improvement (discussed above) or reach 450 weeks.

Do employers have to continue to provide health insurance while a worker is out on Workers’ Compensation?
There is nothing in the New Jersey Workers’ Compensation law that prevents an employer from discontinuing an employee’s health benefits coverage while they are unable to work as a result of a job-related injury. However, some protections are available under the Federal Family Medical Leave Act (FMLA) which may run concurrently, or at the same time, as Workers’ Compensation.

What are the penalties for not participating in Workers’ Compensation?
The penalties for not participating in Workers’ Compensation can be severe (even without a work-related injury) and can include criminal charges and fines of up to $5,000 for the first 10 days and up to $5,000 for each additional 10-day period where there is no insurance. In the case of a corporation, liability for failure to insure can extend to the corporate officers individually.

While most employers don’t consciously ignore the requirements, issues can arise when employers use contractors, or freelancers, or consultants (also known as independent contractors). Generally speaking, if someone is a true independent contractor, they are not eligible for workers’ compensation. The problem arises when someone has been misclassified, that is, their relationship with an employer is really that of an employee rather than a contractor with a portfolio of other clients, who is free to come and go. There are a series of tests state and federal authorities use to determine whether someone is an employee or an independent contractor. (See NJBIA’s Fast Facts document on Independent Contractors and Worker Misclassification for more information.) Worker misclassification may be brought to light as a result of state or federal audits for unrelated reasons, or because a worker gets injured on the job.

Other Resources

An Employer’s Guide to Workers’ Compensation in New Jersey: https://www.nj.gov/labor/forms_pdfs/wc/pdf/WC-373.pdf

New Jersey Compensation Rating & Inspection Bureau: https://www.njcrib.com

For More Information
If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or member411@njbia.org.

This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.