Employers’ liability insurance (UK) or Workers’ compensation (USA)

There is a disparity between the UK and the USA in respect of an employer taking out an insurance policy to protect their employees in case they become injured at work or sick due to work conditions. In the UK, employers’ liability insurance is compulsory under the Employers’ Liability (Compulsory Insurance) Act 1969. As well as being insured the employer must post details of the insurance so that staff can see how they are insured. The requirement to post details has exceptions including public organisations and certain micro-companies.

Animal shelters should have a workers' compensation system in place
Animal shelters should have a workers’ compensation system in place. Photo: Pixabay.

In the USA, the position is different. It is actually remarkably difficult to find information online about the American equivalent of the UK’s employers’ liability insurance. I even entered into an instant message (IM) conversation with an insurance company and they couldn’t answer the direct and fundamental question as to whether it was obligatory in America to take out an insurance policy protecting employees.

It appears that it is normally compulsory on a state-by-state basis. To the best of my knowledge, there are no federal laws making it compulsory for an employer to ensure their employees. For example in Maryland it is compulsory. I bumped into that information on my journey across the internet.

It is called workers’ compensation in America but they sometimes refer to the UK law and description i.e. Employers’ Liability (Compulsory Insurance) Act 1969. There appears to be an exception to mandatory insurance for employees and that is in the state of Texas as at 2018. I would advise any employer to research the matter quite carefully but they may have difficulty in finding a quick, clear answer.

It appears that large organisations can run their own insurance policy without going to a third party. For smaller organisations it makes sense to take out a policy with a company providing the insurance. And there are hybrid versions in which the employer asks experts from an insurance company to investigate workers’ compensation claims and then the company pays out of their own pocket.

As this website is about the animal-human relationship, this information is relevant in respect of businesses such as cat breeders, boarding catteries, animal shelters, cat shelters, cat sanctuaries, veterinary businesses, animal grooming parlors and so on. Normally cat breeders are hobby breeders. In which case there will be no employees and therefore this insurance is inapplicable. There are many animal shelters in America so I would expect some sort of insurance policy to protect employees is in operation. There will normally be public liability insurance in place as well. And of course there are contractual matters i.e. breach of contract to insurance against.

In America there are “workers’ compensation commissions”. These organisations oversee the relevant state’s workers’ compensation schemes. For example, in North Carolina, the organisation responsible for administering the workers’ compensation scheme is referred to as the North Carolina Industrial Commission.

On a practical level it clearly makes sense to take out an employers’ liability insurance scheme (system). This is because you can never know when an accident might take place in the workplace but clearly it depends wholly on the nature of the business. An employee may well commence a lawsuit against their employer if they are switched onto that possibility. Small business may have difficulty paying compensation if they are at fault when the employee’s injury causes them to be unable to work for a long period of time. A serious injury may even prevent them from working again. Under these circumstances compensation may be in the millions of dollars or pounds.

A quick search online indicates that in America the cost of workers’ compensation insurance is about $450 annually per employee. This is not an insubstantial some for a small business. Although the cost varies tremendously depending upon the state legislation, the industry concerned and the employers’ claims history. Rates can be as low as $0.10 per $100 of payroll or they might exceed $29 per $100 of payroll, in multi-employee environments.

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Post Category: Insurance