Pursuant to Internal Revenue Code Sec. 104(a)(1) and IRS Reg. Sec. 1.104-1(b) if you are receiving workmans compensation under a state program mandated by state law due to a job related injury or sickness, then the benefits are tax-free.
However, If your employer is continued to pay you while you are injured or sick and is requiring you to turn over the workmans compensation amount to him, then you are only taxed on the difference between your salary and the workman's compensation amount.