Workers' Compensation laws were enacted to reduce the need for litigation, and to mitigate the requirement that injured workers prove their injuries were their employer's "fault". The first state law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted some kind of workers' compensation regime.

In the United States most employees who are injured on the job have an absolute right to medical care for that injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities.

Most employers are required to subscribe to insurance for workers' compensation, and an employer who does not may have financial penalties imposed. In many states, there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.

It is illegal in most states for an employer to terminate an employee for reporting a workplace injury or for filing a workers' compensation claim. Most states also prohibit refusing employment for having previously filed a workers' compensation claim. However, employers can consult commercial databases of claims data and it would seem nearly impossible to prove that an employer discriminated against a job applicant because of his or her claims history. To abate discrimination of this type, some states have created a "subsequent injury trust fund" which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or to make it anonymous.

It is also illegal to falsely claim workers' compensation benefits. Employers at times hire private investigators to videotape claimants surreptitiously.

Some employers vigorously contest employee claims for workers' compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers' compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant's legal expenses to a certain fraction of an award; such "contingency fees" are payable only if the recovery is successful. In some states this fee can be as high as 40% or as little as 11% of the monetary award recovered, if any. If no award is recovered, the attorney will be paid nothing and loses the time and money he or she put into the case, thereby having essentially worked for free.

In the vast majority of states, original jurisdiction over Workers' Compensation disputes has been transferred by statute from the trial courts to special administrative agencies.Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers' compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer.