What is Workers’ Compensation Insurance? Read on to learn more. Prior to the adoption of workers’ compensation laws, employees who were injured or became ill due to their job had to file a lawsuit against their employer for any type of compensation to cover medical bills, disability or lost wages. In the event of the employee’s death on the job, their family had to file a lawsuit against the employer to receive a death benefit. If the employer was not found totally at fault, injured employees or their families could be left with a large legal bill but no financial restitution.