Employment Law Practice Exam

What is a characteristic of workers' compensation?

1. Employees are compensated for injuries only if the employer's negligence is proven.

2. Experience rating provides strong incentives for employers to maintain safe workplaces.

3. It is designed to fully replace all lost income due to inability to work.

4. Employers can avoid paying if employee carelessness contributed to the injury.

The correct answer is: Experience rating provides strong incentives for employers to maintain safe workplaces.

Workers' compensation systems are designed to provide financial support and assistance to employees who sustain injuries or illnesses as a result of their job. One key characteristic of this system is how it interacts with employers through the concept of experience rating. Experience rating is a mechanism used to adjust an employer's workers' compensation insurance premiums based on their claims history. If an employer has a poor safety record and incurs a higher number of claims due to workplace injuries, their premiums may increase. This incentivizes employers to prioritize safety measures and create a better work environment to reduce the occurrence of injuries, which can ultimately lower their insurance costs. This focus on maintaining a safe workplace serves the dual purpose of protecting employees and reducing financial liabilities for employers. Other options do not align with the fundamental principles of workers' compensation. For instance, compensation is typically provided regardless of negligence, meaning that employees do not need to prove employer fault to receive benefits. Additionally, while workers' compensation provides financial support, it often does not fully replace all lost income. Furthermore, employees may still receive benefits even if their own carelessness contributed to the injury, underscoring the "no-fault" nature of workers' compensation systems.