If your business has employees in the state of Arizona, you’ll need to make sure you adhere to Arizona’s Workers’ Compensation Insurance laws. Workers’ Compensation provides medical and financial benefits for employees who suffer work-related injuries or illnesses or for their survivors in the case of an employee death.

Who needs Workers’ Compensation Insurance in Arizona?

Arizona requires all employers who regularly hire at least one employee to obtain Workers’ Compensation Insurance. In Arizona, an “employee” is generally defined as someone who is in the service of an employer that regularly employs at least one worker.

The Arizona Workers’ Compensation Act (WCA) defines all of the requirements for Workers’ Comp in Arizona, and the Industrial Commission of Arizona (ICA) monitors, enforces, and administers the program. Ensuring your company is in compliance is critical, as there are serious penalties and fines for those who fail to abide by state regulations.

What employees are covered under Workers’ Compensation in Arizona?

Almost all workers are covered under Workers’ Compensation in Arizona. If you provide work or services for an employer, you will likely be eligible for Workers’ Compensation Insurance.

The following are categories of employees that are eligible for Workers’ Comp coverage:

• Full-time and part-time employees
• Apprenticeships and internships
• Contract employees
• Undocumented workers
• Minors
• Volunteers who work at certified health care institutions or volunteer firefighters

The following are categories of employees that are generally excluded from Workers’ Comp coverage:

• Independent contractors
• Domestic workers
• Volunteers
• Casual or occasional workers
• Real estate salespeople
• Employees of motion picture companies doing business in the state temporarily

What Workers’ Compensation benefits do employees receive?

Under Workers’ Compensation in Arizona, employers are required to provide the following benefits to employees who are injured in the course of employment:

Medical Benefits

• Medical expenses, including surgery, hospital stays, doctor visits, nursing services, medications, crutches and other devices, artificial limbs, and any other treatment reasonably required.

Temporary Total Disability Benefits

• If an injured employee is unable to return to work and is still under active medical care, he or she is eligible to receive Temporary Total Disability (TTD) benefits while recovering, which provides 66 and two-thirds percent of a worker’s average monthly wage pre-injury. \
• If an injured employee has any dependents, the benefit amount is increased by $25 per month.
• The ICA establishes average monthly wage limits for calculating TTD benefits, which change yearly. In 2020, the maximum average monthly wage was $4,888.56.

Temporary Partial Disability Benefits

• If an injured employee is cleared by a medical professional to return to work in a partial or limited capacity while still under active medical care, he or she may be eligible for Temporary Partial Disability (TPD) benefits. TPD benefits provide 66 and two-thirds percent of the difference between a worker’s pre- and post-injury average monthly wage.
• The ICA establishes average monthly wage limits for calculating TPD benefits, which change yearly. In 2020, the maximum average monthly wage was $4,888.56.
• TPD benefits are available until the injured worker has recovered enough to fully return to work or the injured worker’s wages return to a pre-injury level.

Permanent Partial Disability Benefits

• If an injured employee recovers from an injury but has a permanent partial impairment, he or she may be eligible for Permanent Partial Disability (PPD) benefits.
• The amount that is paid out for PPD benefits depends on a number of factors, including whether the impairment is “scheduled” or “unscheduled.”
• Scheduled impairments involve partial or total loss of use of the eyes, hands, arms, feet, legs, hearing, or vision. Benefit amounts are determined by the level of impairment and whether or not the employee can return to work.
• Unscheduled impairments involve body parts that aren’t classified as “scheduled.” Benefit amounts are determined by the employee’s reduced earning capacity due to the impairment.
• The ICA establishes average monthly wage limits for calculating PPD benefits, which change yearly. In 2020, the maximum average monthly wage was $4,888.56.

Permanent Total Disability Benefits

• If an employee suffers an unscheduled injury and develops a permanent total disability precluding the possibility of earning any wages, he or she may be eligible for Permanent Total Disability (PTD) benefits.
• PTD benefits provide 66 and two-thirds percent of a worker’s average monthly wage pre-injury, payable for life.
• The ICA establishes average monthly wage limits for calculating PTD benefits, which change yearly. In 2020, the maximum average monthly wage was $4,888.56.

Death Benefits

• Employers are required to pay up to $5,000 to cover funeral expenses.
• A worker’s surviving dependents may be eligible to receive 66 and two-thirds percent of the deceased employee’s average monthly wage, up to the maximum average monthly wage set by the ICA.

What are the penalties for breaking Arizona Workers’ Compensation laws?

Failure to adhere to the Workers’ Compensation laws set out by the WCA can result in significant fines and even imprisonment. In order to avoid any costly penalties, it’s important to consult the WCA or your insurer to ensure you are in compliance. Below are the major ways in which companies can be penalized:

Failure to Purchase Coverage

• Failure to purchase Workers’ Compensation Insurance in Arizona may be charged as a Class 6 felony, punishable by a fine of up to $150,000 or up to one year of imprisonment, or both.
• A first offense fine can be up to $1,000.
• A second offense within five years of the first offense can result in a fine of up to $5,000.
• Any subsequent offenses within the same five-year period can result in a fine of up to $10,000 for each instance of noncompliance.
• The ICA may also recover any attorney’s fees spent to levy these penalties, charge 10 percent interest on fines that are owed, and obtain an injunction to stop the employer from operating.

Intentional Misrepresentation

• If an employer purposefully gives false information about its payroll, job descriptions, or history of losses to an insurer, they may be charged with a Class 6 felony, punishable by a fine of up to $150,000 or up to one year of imprisonment, or both.
• The ICA may also levy penalties of up to three times the amount of premiums the employer saved through misrepresentation.

Unfiled Injury Reports

• If an employer fails to inform its insurer and the ICA about a work-related injury within 10 days of being notified of the incident, fails to provide the ICA with injury reports upon request, or fails to provide an injured employee with information on the employer’s insurer and Workers’ Compensation policy details, the employer may be charged with a petty offense, punishable by a fine of up to $1,000.

How much does Workers’ Compensation Insurance cost in Arizona?

According to the National Academy of Social Insurance Workers’ Compensation Report (October 2019), the average employer cost for Workers’ Compensation in Arizona was $0.88 per $100 of covered wages. This figure is estimated across all insurers and all industries, so the cost to your particular business may vary.

How does the Workers’ Compensation claims process work in Arizona?

The claims process in Arizona begins with the employee. If an employee suffers a work-related injury or illness, he or she must immediately report the condition to the employer. The employer then must file a report with the ICA and their insurer within 10 days.

The injured employee needs to fill out a claim form with the ICA within one year of the injury occurring. Any delays beyond one year may forfeit an employee’s right to benefits.

After the ICA receives an employee’s claim form, it will notify the employer of the claim. Within 21 days of this notification, the employer must accept or deny the claim. If the claim is accepted, the employer must begin to pay benefits to the injured employee within 21 days of receiving notice of the claim. Within 30 days of making the first benefit payment, the employer must provide the ICA with information on the employee’s average monthly wage.

Arizona Workers’ Compensation Insurance Resources

For more information on Arizona Workers’ Compensation laws and requirements, please visit the following resources:

• Industrial Commission of Arizona (ICA)