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Workers’ compensation insurance can become complicated in some respects, but its purpose is quite simple: First, it compensates workers for part or all of their income if they are injured on the job, regardless of who was at fault for the accident. Second, it protects you, the employer, from being sued for damages or negligence resulting from the incident. If a small business does not have this type of coverage, it can easily be bankrupted by just one personal injury lawsuit stemming from a work-related incident.

In the event of a workplace accident, the injured employee can expect some type of income replacement benefits. The amount she will receive is based on two factors: whether the disability or injury is total or partial, and whether it is permanent or temporary. Although most states stipulate that benefits be paid for the duration of the person’s injury, some specify a maximum number of weeks, particularly in the case of a temporary disability. The exact benefit amount a worker will receive is a set percentage of her weekly salary.

Exactly what injuries are covered under workers’ compensation insurance? Your employees who are acting in the “course and scope” of employment are protected by this coverage, whether accidents or illnesses occur on your premises or elsewhere. For instance, let’s say your employee is making a site visit to one of your clients and gets injured or killed in an automobile accident. It doesn’t matter if he is driving your company vehicle or his own; he is still covered because he is engaged in a work-related task. Note that accidents sustained while someone is driving to or from work are not covered. This insurance does, however, protect employees against workplace violence, terrorist attacks, natural disasters and illness due to work-related toxic chemicals.

For injuries such as those described above, there is no question or controversy regarding an employee’s right to receive workers’ compensation benefits. However, what happens if a worker is hurt at a picnic, banquet, sporting event or holiday function sponsored by her employer? Are these events considered to be part of the job, compensable under workers’ compensation coverage? At one time, the answer would have most likely been a firm “no,” but times are changing.

insured workers having a party

These days, many states have modified their rules pertaining to these types of injuries. If it is deemed that the accident “arises out of” and is “in the course of employment,” the employee may have a legitimate claim. To definitively answer the question of eligibility in a particular case, courts ask themselves these questions:

  • Did the incident occur in the workplace during a lunch or recreational period as part of regular employment?
  • Did the employer expressly say or imply that the activity was a requirement or part of an employee’s job?
  • Does the employer gain a great deal from the activity or event at which the employee was injured – beyond improvement of employee health or well-being?

If you think that answering these questions always clears the way for easy resolutions to this issue, think again. A recent situation in South Carolina illustrates that the waters are still pretty murky.

Stephen Whigham, a company manager, conceived of and organized an employee kickball game as a team-building exercise. The plan was approved by Whigham’s supervisor, and the employer covered the costs. As bad luck would have it, Whigham broke his leg during the last play of the game, necessitating two knee surgeries and possible additional surgery in the future. Whigham filed a workers’ compensation claim which was rejected by the workers’ compensation commissioner, the full commission and the court of appeals. As they saw it, the injury didn’t arise out of and in the course of employment because Whigham’s attendance wasn’t required and the employer did not benefit beyond simply raising worker morale.

Eventually, the South Carolina Supreme Court reversed the appeal, ruling that the injury did in fact arise out of and in the course of employment. Had Whigham opted not to attend, he testified that his absence would be construed by his supervisor and other employees as a case of “poor management.” Therefore, the court decided that Whigham’s presence was mandatory not voluntary and that his position was unique among all the employees. In addition, the court recognized that the company had promoted the event in various ways and gave Whigham credit for the event’s success on his performance evaluation, further proof that his presence had been an expected requirement of his job.

The dissenting Supreme Court justices countered that even if Whigham’s attendance had been required, no one forced him to play kickball. They also expressed concern that the same consideration for workers’ compensation coverage might not have been given to Whigham had he been a rank-and-file employee and not in management.

As you can see, little is clear-cut when it comes to the details of certain parts of the workers’ compensation eligibility question. Although the South Carolina case has been resolved, only time will tell if the conclusions arrived at in the Palmetto State will set a precedent for situations brought to the courts in other jurisdictions. The dissent in the Whigham case shows that there are many cogent points on both sides of this complex issue. Even so, one conclusion seems incontrovertible: If you are an employer and are considering holding a social or recreational event for team-building or morale-boosting purposes, make sure you have a solid understanding of the workers’ compensation statutes in your state. It’s better to be aware of them ahead of time than to be forced to learn them the hard way – in front of a board of commissioners or in a court of law.

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