Workers Compensation History In Focus

Business

Workers compensation history goes back a long way, and it has become a key element of the American workforce. An early example of workers compensation history was recorded in 2050 BC, when Ancient Sumeria introduced a law giving money to injured workers. Comparable laws were already adopted in Ancient China, Greece and other countries. For instance, Ancient Arab law stated that, if injured workers harmed their ears, they received a cash sum depending on the injury’s surface area.

Once the Industrial Revolution began, it led to severe working conditions in factories. There were many accidents that occurred, and the number of people who were injured soared. Although injured workers were seldom awarded compensation, they could request assistance from the courts. Nonetheless, the legal process for injury compensation was extremely limiting — so limiting that the concepts outlined below gained notoriety as an ‘unholy trinity’. Employers who demonstrated that the following things were true about an injury, could avoid paying workers compensation:

  • If the injuries were caused by another employee, employers were not penalized.
  • If a worker caused his own injuries, employers were not held accountable – irrespective of how dangerous the work environment or machinery was. Therefore, a worker who lost his hand after slipping would not get compensation.
  • If a worker signed a contract relinquishing his right to claim compensation, an employer would not have to pay anything. The doctrine known as the ‘assumption of risk’ stated that employees realized the dangers of their profession when they started their jobs. For this reason, these unjust documents became known as ‘death contracts’.

In Prussia, the emergence of Realpolitik brought an end to this difficult period for workers. The Prussian Chancellor, Otto von Bismarck, introduced a social insurance system called the 1871 Employer’s Liability Law. This protected the welfare of workers in specific quarries, factories, mines and railroads.

Bismarck introduced accident insurance for workers in 1884, laying the foundation for a similar type of insurance in America. Notwithstanding, it actually took over three and a half decades for each American state to introduce its own law for workers compensation. The first state to do this in 1911 was Wisconsin. During that year, workers compensation legislation was adopted by nine further states. Over the nine year period that followed, similar laws were passed by thirty-six other states. The last state to do this in 1948 was Mississippi.

The American system for workers compensation shares similarities with Bismarck’s. This early legislation forced employers to offer salary replacement and medical benefits to workers who got injured. Workers who accepted these benefits could not sue their employers. In the modern world, the fundamental aspects of workers compensation have not changed much. In the majority of states, employers are obliged to have insurance to compensate both full time and part time workers.

Small businesses must, and self insured groups can, buy worker compensation policies to cover work related employee injuries. Sometimes, self insured groups adopt a ‘hybrid’ methodology. That is, they pay an insurance firm to assess workers compensation claims, while paying for the claims themselves out of their own budget.

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