Workers’ compensation insurance is like an old sweater — it’s there when you need it, but you may not think about it much until that time comes. However, it’s not a bad idea to pull it out every now and then to make sure it still fits.

Here are some points to keep in mind as you look in the mirror.
Workers’ compensation laws in Arizona are designed to protect both the employer and the employee when the latter is injured on the job. The most important thing to know about workers’ compensation in Arizona is that insurance is mandatory for every business — public and private — that has one or more employees.

It also is important to understand that workers’ compensation is a “no fault” system, meaning that insurance benefits generally are made available no matter who is to blame for the employee’s injury. Injured employees are entitled to full-medical benefits and lost-wage compensation while they are unable to work, with no cost or time limits. Job retraining benefits are sometimes provided, as well.

Although workers’ compensation insurance is mandatory for employers, Arizona law allows an individual employee to opt out of the system.

Those who choose to remain covered by an employer’s insurance — and the vast majority of workers do — generally give up the right to sue their employer or co-workers for their injury in exchange for the security of receiving insurance benefits as provided by workers’ compensation laws.

Those who opt out retain the power to sue their employer for damages resulting from on-the-job injuries. However, they are required to prove negligence, which can be a difficult task.

Arizona businesses have three options for obtaining workers’ compensation insurance: they can purchase coverage through a private insurance carrier, they can self-insure or they can be part of a competitive state fund, such as the privately operated State Compensation Fund, or SCF.

Small businesses also may have the option of joining with others in related fields to purchase a group insurance plan.

The most important thing to keep in mind if an employee is injured on the job is that a claim with the workers’ compensation insurer must be filed as soon after the incident as possible. Thus, employees should be trained to notify their supervisors as soon as they are injured to ensure timely claims reporting.

Workers suffering temporary or permanent total disability receive payments determined by a percentage of their wages with a maximum weekly pay out. Benefits continue for as long as the employee is disabled. In the event of an on-the-job death, benefits based on a percentage of the worker’s wages are paid to his or her survivors.

Although workers’ compensation laws are designed to curtail lawsuits, there are situations where employers or insurance carriers may face legal action by an employee and will require legal counsel.

The most obvious case of liability exposure is when an employer fails to carry workers’ compensation insurance and a worker is injured on the job.

Another legally hazardous situation is when there are multiple employers on a single job site. A construction site is a good example of this, as is an office setting with an independently operated print shop or snack bar. If a person employed by one company is injured by an employee of another company, the injured worker may be allowed to sue the company that does not employ him or her for damages. An employer is only protected against suit by its own employee, not someone else’s employee. Therefore, it is important to make sure the work site is as safe and hazard-free as possible to prevent on-the-job injuries.


Those who opt out retain the power to sue their employer for damages resulting from on-the-job injuries. However, they are required to prove negligence, which can be a difficult task.


Finally, when a workers’ compensation claim is denied and the employee appeals, the case works its way through the Industrial Commission of Arizona and, eventually, into the courthouse. At that stage, we recommend the employer seek assistance from an employment law specialist.

Thankfully, most of the time, the system runs as it should, the old sweater still fits, and it stays on the shelf, waiting for that rare bad-weather day.

Greg Coulter and Steve Biddle are shareholders in the Phoenix office of Littler Mendelson, an employment and labor law firm representing management. They can be reached at (602) 474-3600, or GCoulter@littler.com or SBiddle@littler.com