Learn how unemployment benefits and workers’ compensation interact. See when injured workers can collect both at the same time.
American workers are protected from unexpected job loss through state-mandated unemployment insurance and workers’ compensation.
While both programs provide some measure of wage replacement to eligible workers, the similarity ends there.
If you’re out of work following an on-the-job injury, it’s important to understand the difference between unemployment and workers’ compensation, and when you might be eligible to claim benefits from one or both programs.
If you’re entitled to receive both types of benefits, there are times when you might not want to do so.
While workers’ compensation payments are not taxable income, unemployment compensation is taxable. Sometimes your worker’s comp benefits offset unemployment payments, so it might not make financial sense to collect benefits from both programs.
Unemployment vs. Workers’ Compensation
Unemployment benefits are typically weekly cash payments given to unemployed workers who are actively looking for new positions. Each state sets a limit to the number of weeks a person can draw unemployment benefits.
Workers’ comp benefits are medical and wage replacement payments given to workers injured in the course of employment. Benefits are paid when injuries prevent the worker from performing some or all of their job duties.
Injured workers who are physically unable to work in any capacity will not be eligible for unemployment payments, even if they were laid off from work.
Injured workers who lost their job, but have been medically released for restricted or “light duty” work, might be eligible for unemployment while looking for jobs that meet their restrictions. They may also continue to get workers’ comp to pay any wage difference.
Your disability status after a workplace injury determines if you’re eligible to apply for your state’s unemployment benefits.
Eligibility for Unemployment Compensation Benefits
You’re qualified to receive unemployment benefits if you’re unemployed, capable of working, and actively looking for employment. The benefits are designed to support you financially while seeking a new job. Unemployment compensation benefits include cash payments made to qualified people.
The amount of benefits is not the same for every person eligible to receive them. The specific amount is determined by state laws and the worker’s prior wages.
Use the U.S. Department of Labor Unemployment Benefits Finder to see your state’s unemployment benefits and eligibility requirements.
Unemployment insurance benefits are considered part of your taxable income. This means you’ll have to pay federal and state taxes on the total amount of unemployment compensation that you receive.
Eligibility for Workers’ Compensation Benefits
Employees are qualified to receive workers’ comp benefits provided they’ve suffered a work-related injury. An injury is “work-related” if it occurred in the course and scope of employment.
As with unemployment compensation, the exact amount of workers’ comp benefits will differ among injured employees. The specific amount is determined by the workers’ pre-injury wages, the severity of a workplace injury, and the facts of a worker’s case.
Unlike unemployment payments, wage replacement benefits from a workers’ comp claim are not taxable income.
What Does Workers’ Compensation Cover?
Workers’ comp is an insurance program where an employer’s insurer provides certain disability benefits to qualified workers.
Workers’ compensation benefits include:
- Payment for medical expenses and rehabilitation
- Partial wage replacement (usually two-thirds of normal wages)
- Vocational training, if necessary
As to compensation for wage replacement, you’ll receive benefits categorized as either Temporary Partial Disability, Temporary Total Disability, Permanent Partial Disability, or Permanent Total Disability. The exact nature of your benefits will depend on the severity of your injury.
Collecting Both Benefits at Once
The general rule in most states is that workers who are receiving workers’ comp benefits can’t simultaneously receive unemployment benefits.
This is typically the case because you’re only eligible to receive unemployment benefits if you’re physically capable of working. Most employees injured on the job are not immediately capable of returning to work because of their workplace injury.
With that said, you could collect both unemployment compensation and workers’ comp benefits if you were injured on the job and are still capable of working despite your injury.
Consider, for example, a landscape worker who injures their back while carrying a shrub. If the worker loses their job because of the injury and can still perform some light-duty tasks, they can collect both types of benefits.
If you’re eligible to receive both unemployment benefits and workers’ comp benefits, eligibility doesn’t mean that you have to apply. There are good reasons that you may not want to receive unemployment benefits.
For example, most states will deduct every dollar that you receive in workers’ comp from your unemployment compensation payments. So if you’re receiving a large amount of money from workers’ compensation, you’d not make much money from unemployment compensation.
Also, remember that unemployment benefits are taxable. Some people may decide not to receive these benefits because they don’t want the tax burden that comes with them.
Losing Your Job as a Condition for Unemployment Benefits
A worker can only receive unemployment benefits if they lose their job through no fault of their own. If your employer offers you a temporary position after your accident performing less demanding work, then you’re not legally qualified to refuse the position and collect unemployment.
There are also times when an employee can’t return to work immediately after an injury, and the person’s employer puts their job on hold. The intent of the hold is to let the employee know that they’ll have a job when they fully recover from their injury. In this situation, most states say that the injured worker can’t collect unemployment benefits.
The same result applies if an injured worker is not working after a workplace injury but collects workers’ comp vocational benefits.
Limitations with State Laws
Some states effectively prohibit injured workers from collecting both workers’ compensation insurance money and unemployment benefits.
For example, Florida won’t allow a worker to collect unemployment if they’re receiving temporary total or permanent total disability workers’ comp benefits, as you must be medically able and available for work to qualify for unemployment.
Similarly, Missouri law states that workers can’t receive unemployment compensation if they’re collecting Temporary Total Disability Benefits.
Compensation if Workers’ Comp is Denied
If your worker’s compensation claim gets denied, then you’re likely eligible to file an unemployment claim.
You can file a claim provided that you lost your job because of an injury and are capable of working. It’s not necessary that you’re able to perform the job that you had before your accident. You just have to have the physical ability to work in some capacity.
Reasons why an insurer may deny a workers’ comp claim:
- You weren’t hurt “on the job” or in the course of your employment
- You failed to promptly inform your employer of your injury
- You didn’t file your workers’ comp claim on time
- Your employer disputes your injury
Workers have the right to appeal an insurer’s decision to deny a claim. If a claim was denied because your employer disputes your injury, and you want to appeal the denial, then you probably wouldn’t want to file for unemployment benefits.
Recall that you can only receive unemployment benefits if you’re capable of working. Your employer may try to use your collection of unemployment as evidence that you really weren’t injured on the job.
If your workers’ comp claim gets denied, the insurance company has to send you a denial letter that states the reasoning behind the denial. Make sure you read the letter carefully before deciding to file for unemployment. If you do decide to appeal, you’ll want to protect your workers’ compensation case.
Unemployment After Job Termination
There are times when an employer fires a worker after suffering a workplace injury. Employers can legally fire injured workers for several reasons in an at-will state.
Legitimate reasons to fire an injured worker:
- Your employer can’t offer light-duty work to accommodate your work limitations
- You can’t physically perform your job duties
- Your employer doesn’t like your job performance
Keep in mind that employers can even fire workers for a non-work related injury.
No matter the exact reason for the firing, you can probably successfully file for unemployment benefits after getting fired for an injury.
Workers can generally receive unemployment benefits with no problem if they get laid off. However, there are some limitations when a worker gets fired from their job because of some misconduct.
Examples of misconduct that may prevent unemployment benefits:
- Intentionally violating work policies
- Repeated inexcusable absences from work
- Lying or committing acts of dishonesty
- Performing acts that jeopardize the safety of the workplace or other workers
- You refused to return to work after medical clearance
Suffering an injury, while either at work or off work, are not examples of misconduct that would prevent a worker from receiving unemployment benefits.
You can still file for the benefits so long as you reported your injury to your employer and aren’t lying about your accident and injuries.
Contact a Workers’ Compensation Attorney for Help
Workers’ compensation laws are often complex. Rules pertaining to unemployment benefits can also be difficult to understand at times. It pays to get personalized legal advice.
Complex and difficult laws mean you’ll want to contact a skilled workers’ comp lawyer or an unemployment benefits lawyer for help, especially if you’re contemplating filing both types of claims simultaneously.
An experienced attorney will know if you’re entitled to file both a workers’ comp claim and a claim for unemployment benefits.
If you qualify for both, your lawyer will advise whether or not doing so is in your best interests. There are times when it might make sense to file for a workers’ comp claim and opt out of filing an unemployment claim.
Most attorneys that advise on workers’ comp and unemployment issues provide a free consultation. It costs nothing to find out what a good lawyer can do for you.
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