Workers’ compensation eliminates the need for workers to bring legal action against employers to prove negligence, and it makes the employer strictly liable to the employee for injuries and illnesses sustained by him or her during employment.

Although the classification of workers’ compensation awards remains unsettled in some courts, in the event of divorce courts generally treat compensation payments very much like personal injury awards and divide them according to the intended purpose. Thus in divorce actions legal counsel develops arguments in favor of the desired classification by scrutinizing the desired workers’ compensation statute and the particular award and finding analogies to state case laws relating to personal injury awards.

Depending upon the jurisdiction of the divorce, workers’ compensation awards, like the proceeds of personal injury awards, are mostly marital but sometimes separate property. In divorce actions, jurisdictions use one of three methods to classify workers’ compensation awards: the analytical approach, which is most common; the mechanistic routine, which is the second most common; and the so-called unitary approach, which is least common.

A majority of dual-classification jurisdictions use what is termed the analytical approach. In this routine, courts determine what the compensation is intended to replace and thereby divide different portions of the proceeds as compensation for injuries suffered by the marital or separate estates. Under the analytical approach, compensation for the martial partnership’s losses is marital property, including lost wages, earning capacity and medical expenses.

Some dual classification and all all-property states treat all of the proceeds as marital. Under this regime, which is termed mechanistic, "personal injury proceeds are always and entirely marital property."

A few states, following what is termed the unitary approach, treat workers’ compensation as entirely separate.

Workers compensation benefits generally are wage replacement, not compensation for an injured spouse’s pain and suffering, but if part of the award is intended to compensate for noneconomic loss, such as disfigurement, that aspect of the award is separate property.

Lump-sum payments without explanation of what the money is intended to replace are problematic, and the outcome may depend on whether or not the state has a marital property presumption. Postjudgment interest income on the award is classified under the normal rules of passive income in the jurisdiction; therefore, interest on martial income is always marital and interest on separate property award is marital if the income from separate property is treated as marital.

Under the analytical approach, pain and suffering, however, "...is the most personal type of compensation an injured spouse can receive." Thus, awards for pain and suffering are the separate property of the injured spouse. In a like manner, loss of consortium compensates the uninjured spouse for pain and suffering. Disfigurement, which compensates for the "pain and embarrassment having a highly obvious injury," is separate property.

Under the mechanistic approach, compensation is very often divided unequally.

See also Personal Injury Proceeds; Personal Injury Awards.

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