How Changes to Worker’s Compensation Will Affect Small Businesses

Worker’s compensation is a type of insurance that covers workers who have been injured on the job. For example, if a warehouse worker lifts a heavy box and winds up with a swollen disk that requires physical therapy, they will be covered by worker’s compensation since they were performing job duties at the time of an injury. In contrast, an employee who suffers injuries in a car accident on the way to work will not be covered since they were not performing job duties at the time of the accident.

Under worker’s compensation, medical bills lost wages, and other related expenses were completely covered. At the beginning of the pandemic, it was unclear if worker’s compensation claims could be filed for the disease. Many workers suffering from the coronavirus struggled to stay afloat financially.

That confusion came to an end with Governor Gavin Newsom ruled that employees who contracted COVID-19 would be covered by workers’ compensation, regardless of whether they were exposed during the normal course of their job duties. That means that an essential worker who caught COVID-19 at the grocery store would still be covered by their employer’s worker’s compensation insurance.

On its surface, this seems like a fair and equitable ruling for employees. Still, the reality of the added financial burden on small businesses could mean the death of many small companies throughout California. Statewide, the estimated additional premium cost is at an astounding $1.2 billion.

There is no way that a small business can shoulder the added expense of this extended worker’s compensation coverage. In fact, the National Federation of Independent Businesses grimly predicts that six in ten small businesses will close due to this virus’s economic impact.

There is no perfect worker’s compensation solution that will benefit both the companies and their employees, but it is essential to remember that part of the employee-first model is ensuring that there are companies alive and ready to hire employees. If this ruling means the death of small businesses, people all over the state may soon find themselves out of work altogether.