Can an employee sue me if I have workers comp?

Over the injury itself, generally not. Workers compensation is the exclusive remedy for a work injury, so a covered employee receives benefits instead of a lawsuit. The exceptions are narrow and specific, such as an injury caused by the employer’s own willful assault or concealed from the worker, and the employers liability part of your policy is there to defend and pay those. Over anything that is not an injury, such as a termination or a harassment complaint, workers comp is silent and they can sue you.

Does workers comp cover wrongful termination?

No. Wrongful termination, discrimination, harassment and retaliation are claims about how an employee was treated, not about a physical injury, and they are excluded from both workers compensation and general liability. The policy that responds is employment practices liability, and a small employer without an HR function is the one most likely to face the claim and least likely to have bought the policy.

What is employers liability, and what limit should I carry?

It is Part Two of your workers comp policy, and it pays the damages an employee’s injury produces that Part One does not, including the exceptions to exclusive remedy and a claim by a client who was sued over your employee’s injury. The policy is issued with $100,000 per accident unless somebody asks for more. Carry $1,000,000 on each of the three limits; the additional cost is small, and an umbrella policy will require it before it will sit above your workers comp at all.

Our employee was hurt at a client’s site and the client has been sued. Are we covered?

Usually, under employers liability, up to its limit. Your employee cannot sue you, so they sue the client, and the client turns to the indemnity clause in your contract and sends the claim to you. That third-party-over claim is what Part Two exists to pay. Two things decide the outcome, the limit you carry and the indemnity you signed, and a $100,000 employers liability limit against a serious injury is where the trouble usually starts.

We are a staffing company. Our client wants to be protected if our temp is hurt on their floor. What do they need?

An alternate employer endorsement on your workers comp policy, naming the client. It extends the exclusive remedy protection of your policy to the client for the workers you place with them, so an injured temp cannot sue the client over the injury any more than they could sue you. Most staffing contracts require it, and a client that asks for a certificate showing it is asking for the right thing.

We do not carry workers comp. Can an employee sue us?

Yes, and the law says so directly. An employer that has not secured workers compensation can be sued by an injured employee for damages in civil court, as though the comp system did not exist, and the state penalties for being uninsured come on top. Exclusive remedy is the protection you buy with the policy, and without the policy there is no cap on what an injury costs you.

A Black woman in her forties who owns a small manufacturing business standing at the end of a production line, reading a legal envelope she has just opened, machines and two workers in the background

Does workers comp protect us if an employee sues us, for an injury, for wrongful termination, or at a client’s site?

It protects you from one kind of lawsuit and not the others. Workers compensation is the exclusive remedy for a work injury, so an employee covered by your policy generally cannot sue you over the injury, and the employers liability part of the same policy answers the exceptions. It does nothing for a wrongful termination, discrimination, harassment or retaliation claim, which is what employment practices liability is for. And when your employee is hurt at a client’s site and the client is sued, the client’s claim back against you is an employers liability matter, paid up to a limit most businesses never chose.

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The detail

Where an employer carries workers compensation, the right to benefits is the sole and exclusive remedy of an injured employee against the employer. The statute names the exceptions, an injury from a willful physical assault by the employer, an injury aggravated by the employer fraudulently concealing that it was work-related, and an injury from a defective product the employer made and sold to a third party.
California Labor Code section 3602
An employer that has not secured workers compensation loses that protection. An injured employee of an uninsured employer may bring an action at law against the employer for damages, as though the workers comp system did not exist.
California Labor Code section 3706
The standard workers comp policy has two parts. Part One pays the benefits the state requires. Part Two, employers liability, pays damages an employer is legally liable for because of an employee’s work injury that fall outside those benefits, including a claim by a third party that was itself sued over the injury and a claim by the employee’s family for loss of care or services.
NCCI Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00
The standard employers liability limits on that form are $100,000 per accident, $100,000 per employee for disease and $500,000 policy limit for disease, and they are the limits most policies are issued with unless somebody asks for more.
NCCI Workers Compensation and Employers Liability Insurance Policy, form WC 00 00 00
Wrongful termination, discrimination, harassment and retaliation claims are excluded from workers compensation and from general liability, and are insured by an employment practices liability policy. Neither of the other two responds to a claim about a decision rather than an injury.
Kevin Kelsey, agency audit and placement experience
The umbrella policies we place require employers liability of $1,000,000 on each of the three limits underneath them. A business that buys an umbrella with the standard $100,000 employers liability limit still in place has a gap the umbrella will not fill.
Kevin Kelsey, agency audit and placement experience

What this means for you

Exclusive remedy is a benefit of being insured. The reason an injured employee cannot sue you is that the state gave them benefits instead, and the deal holds only while you carry the policy that pays those benefits. Let it lapse and the same injury becomes a civil suit with no policy behind it and no cap on the damages.
Employers liability is the limit nobody chose. Part Two of your policy is where the exceptions land, and it was issued at $100,000 because nobody asked for more. A serious injury that finds its way around exclusive remedy, or a client who sues you after being sued themselves, is a claim measured in millions against a limit measured in one. Raising it to $1,000,000 costs little and most umbrellas require it anyway.
Wrongful termination is a decision, not an injury. Workers comp responds when a body is hurt. It has nothing to say when a former employee claims the dismissal was discriminatory, the promotion was withheld, or the complaint was punished. That is an employment practices claim, it is the most common lawsuit a small employer faces, and it is uninsured until you buy the policy for it.
The client who gets sued sues you. Your employee is hurt on a client’s premises and cannot sue you, so they sue the client. The client’s lawyer reads your service agreement, finds the indemnity clause, and sends the claim to you. That is a third-party-over claim, it is exactly what employers liability exists to pay, and the indemnity you signed is what sets its size.
If you supply people, protect the client on your policy. A staffing or labor contractor’s client is the employer in fact for the hours the worker is on their floor. An alternate employer endorsement on your workers comp extends exclusive remedy to that client, so your injured worker cannot sue them either. Every client contract that mentions your workers comp is asking for it, whether or not it uses the words.
Read the envelope before you decide which policy it is. A lawsuit from an employee can be an injury claim, an employment claim or both at once, and the wrong policy will decline it. Send every suit to your broker the day it arrives, and let the carriers argue about which one responds while the clock on your defense is still running in your favor.

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