Can I Terminate an Employee On Workers’ Compensation?

Can I Terminate an Employee On Workers' Compensation? text overlaying image of a worker leaving his job In the United States, workers’ compensation insurance protects employees who become ill or injured on the job. Reviewing and retrieving medical records is an essential process. It helps in finding medical evidence that lets the insurer make a fair decision about the workers’ compensation claim. An important consideration for any business is whether an employee on workers’ compensation can be terminated. Most states don’t allow employers to take action against employees who file for workers’ compensation. However, employers may legally terminate an employee as long as the termination is not in retaliation for filing the claim and is instead based on misconduct unrelated to the claim. Employers must use extreme caution and follow the appropriate procedures to avoid violating state or federal laws.

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What Is Wrongful Termination?

To start, the termination cannot be motivated by retaliation against the employee for filing a workers’ compensation insurance claim or reporting a workplace hazard. In employment law, retaliation refers to taking an adverse employment action against an employee as a punishment for protected conduct. It is illegal for an employer to fire an employee solely for filing a workers’ compensation claim. As this is a form of protected conduct by law. This would be wrongful termination, which would give the employee the right to sue the employer.

Termination Laws To Keep In Mind

There are both federal and state laws that cover employment termination. Ensuring that an employee is protected from wrongful termination and the employer is protected from claims of wrongful terminations.

“At will” employment

An “at-will” employment state, means that both the employer and the employee can end the employment contract at any time for any reason, this however does not always apply when a workers’ compensation claim is involved. Labor laws prohibit employers from threatening to fire employees who want to file a claim for a workplace injury. The law also protects employees on workers’ compensation leave, however an employer can fire an employee that is receiving benefits under certain circumstances. If the employee is a key employee, such as a manager, supervisor, or the sole employee in a specific department. Without key employees, it is impossible to effectively run a business. So, in this instance if the employee will be out for an extended amount of time employers may choose to terminate the employee and fill the position so the business can continue to run smoothly.

Unrelated circumstances

Employers may terminate employees if they can demonstrate that the termination was unrelated to the workers’ compensation claim. This is where an employee was involved in conduct that, according to the employer’s policy, would result in termination for any employee regardless of injury or illness. For instance employees who are violent at work, steal, or are sexually harassing a coworker or client. You will need appropriate documentation to prove that this happened around the time the employee filed their claim. Meaning an employer can’t bring a claim of theft up a year after the fact to use it as an excuse to fire an employee who filed a workers’ compensation claim.

Benefit statutes

Workers’ compensation laws in most states only provide a portion of salary and medical benefits. These statutes generally do not provide leave on their own. In many states workers’ compensation laws don’t count as employment protection laws. This means that employers may terminate employees on workers’ compensation leave. However, as we said above, the termination can not solely be because the employee filed a claim. As a retaliation termination would fall under labor laws not workers’ compensation laws.

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Employees who receive workers’ compensation can sometimes also be eligible for Americans with Disabilities Act (ADA) and or Family Medical Leave (FMLA). If this is the case the employees leave would then become job protected as the ADA and FMLA laws are employment protection laws.

Workers’ compensation continues

An employee who was fired while on workers’ compensation leave will continue to receive their benefits. They remain eligible for their benefits until their doctor certifies that they can return to work even though they won’t be returning to the job they had when they got sick or injured. Generally, continued employment is not a requirement for continued workers’ compensation benefits.

Return-to-work dates

Injured or sick workers’ on workers’ compensation leave have to provide a return-to-work date. The date should be documented by the employee’s healthcare providers and given directly to their employer. If the employee will not return on the specified date, they have to provide notice beforehand as well as give a new return-to-work date signed off by their doctor. If an employee is medically cleared to come back to work but refuses to, they can be legally terminated.

Employer’s To-Do List

When it comes to terminating an employee on a workers’ compensation or medical leave of absence, a number of laws and various facts and circumstances come into play. Ideally, employers should consult with employment counsel before terminating employees in such situations. Numerous U.S. states have workers’ compensation laws that permit employees to sue in regular court (rather than in a workers’ comp forum) on the grounds that they were terminated in retaliation for claiming workers’ compensation benefits. Employers should prioritize efforts to return their employees to work. To keep yourself and your company safe from being accused of wrongful termination there are a few things you can do. Following this quick checklist will ensure that everything is above board on your end and you won’t have to worry about lawsuits because you’ve done what you need to and are prepared with evidence.


Prove the employee can’t return

This is for if an employee either refuses to return to work after their return-to-work date, or refuses to come back to work for “light duty” that their doctor has medically cleared them for. To do this, you need enough proof of the employee’s disability. You may be able to terminate the employee for excessive absence if the employee is not protected by the ADA or FMLA. You have to take any steps necessary to prove that the employee’s termination was for excessive absenteeism or refusal to return to work and not the result of them filing a claim. 

Follow all FMLA laws

Employers with more than 50 workers are required by FMLA to give employees up to 12 weeks of unpaid leave. As long as the employee has a serious health condition and has worked for the company for at least 1 year and a minimum of 1,250 hours. You have to be sure to comply with these requirements. And that any leave period has expired before you terminate the employee.

Follow ADA laws

The ADA provides certain protections to injured employees that develop an injury that prevents them from performing work-related activities. Such as lifting or walking. Only injured employees who meet the ADA’s definition of disability will qualify for ADA protections. To qualify the employee must have an injury or illness that is severe enough to cause either temporary or permanent physical or mental impairment that “substantially limit” major life activities.


If the employee is eligible for ADA protections, employers have to make every effort to provide reasonable accommodations for the employee in their position within the company. Meaning the employer has done everything they can to allow the employee to continue their current job. If the employer can’t do that, then they must provide modified work or another role that meets requirements for a reasonable accommodation. For example, if the employee can not lift anything. The employee would have to be moved to a position where they don’t lift anything. 

Follow your employee handbook

Before you fire an employee, it’s a good idea to read over your employee handbook. Just to make sure there are no other rights that you might violate by terminating them at that time. 

Document everything

You’ll want to document everything on your end for any potential future issues. Firing an employee who has workers’ compensation benefits is a very delicate matter and needs a lot of proof. To avoid any wrongful termination claims, it’s essential for you to have documents that show the legal reason for the termination. This can be anything from complaints from other employees or customers, proof of poor work performance. Or proof of being intoxicated on the job. You’ll want dates and time stamps to show that these issues were recent and weren’t just brought up because the employee filed a claim.

Working With EZ

Each of our customers receives our undivided attention. We make every effort to make shopping for workers’ compensation insurance as simple and stress-free as possible. As soon as you submit our form, you will receive free, instant quotes from your dedicated agent. Who will provide you with individualized service and work to understand your needs. We want to ensure that you make the best possible decision and obtain the best coverage at the best price. Our services are entirely complimentary, so check out your quotes right away.


If you have further inquiries, please contact us at 877-670-3538. You will speak with a local insurance agent who will answer all of your questions. And assist you in locating the most suitable workers’ compensation policy for your business.

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The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.  Information on this website may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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