The California workers' compensation insurance system was established by the Legislature in the early 1900's to provide a means whereby industrially injured employees, or their dependents in event of the employee's death, may receive medical care and weekly cash indemnity payments promptly and automatically without having to resort to costly and time consuming civil court actions. Sort of a legal handshake between employees and employers to settle injury claims peacefully, without costly lawsuits. Before this special program was established, an injured employee usually had to sue his or her employer in civil court to recover compensation for job injuries. The lawsuits often took years to conclude and in many instances the injured employee received nothing.

Under this mandatory program the term "injury" includes "any injury or disease arising out of your employment." Therefore, not only are industrial accidents covered but job-related illnesses are also covered However, common illnesses such as a cold or the flu which can be contracted by a virus at home, movie theater or elsewhere, are generally not covered. The determining factor is whether or not injury or illness is caused or aggravated by your work. To express it another way, the key question is whether your injury or illness "arose out of and occurred in the course of your employment."

All costs of this program are paid by the employer.