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History of Workers' Compensation



The need for a workers' compensation insurance system stemmed from the rise of industrial accidents during the beginnings of the industrial revolution. As employment in factories Increased so too did the number of injuries and deaths among workers.   This rise in injury rates paralleled a decrease in the legal rights of an employee to receive compensation.


Ancient Law


In approximately  1100, during the reign of Henry I, the common laws contained a section which stated that if a person was on a mission for another person and was injured or killed in performing that mission, then the injured person had to swear an oath that the accident was not his fault.  This created the "but - for" theory of causation, in which the injured person would not have sustained the injury but for the undertaking of the mission.  This principle appears to have survived for 400 years or so.

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During the start of the I700's various legal principles were incorporated into law in Great Britain which created the ''master - servant" system in which a master could be held liable for the acts of his servants ("the act of a servant is the act of his master").  This general rule held until an 1837 ruling that an employer was not liable for the negligence of one servant which caused the injury of another.  This became the first of three common-law defenses for employers;  the second was "Assumption of Risk" in which the employee was viewed as having knowingly and voluntarily chosen to accept the risks inherent in the job;  and the third was "Contributory Negligence" in which any demonstrable negligence on the part of the injured employee would defeat the responsibility of the employer for the injury or death.  These defenses were carried over into early U.S. law.

Europe & The United  States


All legislation leading up to Workers' Compensation Acts were based on the European concepts of employer liability only for injury or death due to the negligence or fault of the employer himself or of someone else that he was directly responsible for.  Benefits under these laws provided only for the restoration of the employee to a condition equal to that of a stranger who was injured by that employer or his servants.  An employee enjoyed no greater status than that of a stranger.

Courts eventually began to revise the employer liability laws through legal decisions over time. although legislatures started to take control through statutory revisions in response to the destitution of injured workers and the families of workers killed in industrial accidents.  This began the employers duty to provide a safe workplace, safe tools, safe machinery, etc., and the removal of the employee's assumption of risk for an employer's violation of workplace safety laws.


The State of Georgia enacted a law in 1855 which abolished the fellow-servant defense for railway companies only.  This began a series of legislative changes leading to the first workman's compensation act, and by 1911, 25 states had some form of employer's liability statutes.  Each was different in the changes it made to the three primary

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defenses. leaving a patchwork of state-specific laws.  In 1908 The Federal Employer's Liability Act, which was applicable lo those common carriers which engaged in inter-state business, embodied the most advanced features of all the specific state laws.


The benefits which an injured worker actually received at this time were very low, with most families, for example, settling for a few hundred dollars for the work related death of a relative. After legal fees, burial fees, and other expenses were deducted, the victims of the most serious injuries or deaths were left in poverty.


The Start of Workers' Compensation


In 1838 Prussia adopted the a law making railroads liable to their employees for accidents from all causes except Acts of God and negligence on the part of the claimant.  This law was modified over the years, and in 1884 Germany passed the first modem compensation act This happened 13 years before England, 25 years before the first American jurisdiction, and 65 years before the last American state passed such legislation.  These German laws were based on a socialistic concept of the state's responsibility. in part, for the welfare of its disabled citizens.  However, the first compensation act was based on contributions by both the employer and the employee in Sickness and Accident Funds.


The New York Workman's Compensation Commission studied the German system, issued a report in 1910 which stated that there was no practical way to impose a liability on the employee, and passed the first unilateral employer liability proposal which included no employee contribution,  By that year many states had created Commissions to study the issue in the face of rising injury rates, and the leaders of the Commissions met in Chicago to discuss issues.  This conference led to the adoption of a Uniform Workmen's Compensation Law model, although the statutes finally adopted by the jurisdictions did not resemble the proposal very closely.


Between  1902 and  1911 a number of Acts were passed, first in Maryland, all of which were found to be unconstitutional  on appeal.   In  1913 New York added a constitutional  amendment which permitted the establishment of a compulsory law, and such a law passed that same year.  A number of state Jaws were supported by Supreme Court decisions, and by 1920 all but 8 states  had adopted a workman's compensation statute.  The last state law, in Hawaii, became effective in 1963.


In 1970 the National Commission on State Workmen's Compensation Laws was created by Congress, was filled by 15 presidential appointees, and was chaired by John Burton. This Commission recommended a system of standards for each state's law, standards which exceeded the highest standards proposed earlier. The Commission recommended that the states be a1lowed 3 years to comply with the recommendations or face Federal Legislation which would impose compliance.  A few months following the Commission's report, the Longshoremen's and Harbor Worker's Act was modified to comply with most of the recommendations.  The states have since complied with almost all of the recommendations, bringing some standardization to otherwise individual state systems.  The historical evolution of workers' compensation law and the adoption

of national standards in our state systems has been done to achieve two purposes: protection of the injured worker;  and protection of the employer.


Let's look a little more closely at those goals.


Purpose of Workers' Compensation


There are two primary purposes to every workers' compensation system: protection of the employee, and protection of the employer.


The workers' compensation system is a trade-off for both parties:  employees are guaranteed prompt payment of known indemnity benefits and medical treatment;  employers receive the "Exclusive Remedy" provision in return for these guaranteed benefits.  The exclusive remedy provides that an employee cannot seek tort damages against the employer for work related injuries or covered diseases.  Prior to workers' compensation laws, an employee's only recourse was to take the employer to court and sue for damages under the varied Employer Liability statutes.  An employee's loss of such a suit left the employee with nothing to support his family; an employee's winning of such a suit could easily put an employer out of business.  The workers' compensation statutes strike a balance for each side of a dispute - guaranteed benefits for the employee, relief from potential tort suits for the employer.


However, politics differences, varying economic conditions, legal decisions, and legislative action have created major differences among the jurisdiction in the United States. A brief discussion of those differences follows.


Differences Among Jurisdictions


Each state and jurisdiction  in the country has a separate workers' compensation statute, each of which is unique.  While the exclusive remedy concept is common to each jurisdiction. each has adopted its own set of entitlement thresholds, benefit levels and maximums, durational limits, and supplemental benefit entitlements such as rehabilitation services.  Hence, premium levels as well as benefit levels vary from state to state.  Each state's administration, regulation, and adjudication varies with the polities of the jurisdiction, adding to the variations among jurisdictions.

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