Monday, 3 June 2013

History of Workers Compensation

Workers compensation provides payment to workers who are injured on the job. To break that down, it is a type of insurance that protects against the risk of an on-the-job injury making the worker unable to continue working and gain an income. Employers are taxed in order to create a guaranteed fund of money that worker's compensation benefits can be paid from. This ensures that there are always benefits available to qualifying individuals.
Workers Compensation from the Beginning
Employee benefit systems similar to worker's compensation have been found in ancient Rome, Greece and China where there were pre-determined payment schedules for workers who lost various body parts during the course of their labor. Throughout history, systems like this have existed but they did not exactly mirror the type of worker's compensation benefits employers now must offer.
Most historians place the origins of modern worker's compensation in Germany in the mid-1800's. During the height of the industrial revolution, Germany's government passed legislation that would protect railroad workers in the event of an on-the-job accident or injury. They were following the example of German worker guilds which provided certain benefits (including a disability payment benefit) to the guild members. As a socialist country, Germany was very concerned about offering social insurance programs and this model of worker's compensation fit nicely.
In the 1880's Workers' Accident Insurance, a compulsory plan to provide for workers outside the railroad system who had had an accident on the job, was introduced. This was the first universal and formalized worker's compensation plan.
Workers Compensation Progress through the Years
Workers' Accident Insurance spread through Europe during the late 1800's, though it was often called Workmen's Accident Insurance, and by the 1890's it had replaced England's court run Employer's Liability Act.
By the turn of the century, America had its own workers compensation plan in place with Maryland as the first state to adopt it. Unfortunately, the early plans in America placed a great burden on the injured employee. Instead of just showing the injury and receiving a benefit, the employee had to provide proof that he or she had been injured as a result of employer negligence. Then, after obtaining some sort of proof, the employee had to sue the company in order to be awarded benefits. While this protection was better than no protection, proving their case was difficult and many workers went through the time and expense of a court proceeding without ever receiving a benefit. By 1908, President Theodore Roosevelt stepped in and pointed out the one-sidedness of the present system.
Soon after, in 1911 to be exact, the state of Wisconsin adopted a new workers compensation law that allowed for a tradeoff between injured employee and responsible employer. Rather than forcing the employee to find the proof of the employer negligence and sue, the employer would automatically provide medical care and replacement wages to injured employees. But here is where the tradeoff came in; as a result of the benefits, the employee had to agree not to sue the employer for further damages. While we might credit President Roosevelt with this abrupt change of pace, the reality is more likely that the workers who were able to prove negligence under the old law and sue their employers were taking in more money for damages through lawsuits than employers might have to pay when taking care of the wages and medical expenses of every claimant. In addition, even the lawsuits the employers won had a price since they still had to take the time to defend themselves and had to bear the expense of legal counsel.
The one state that held out of the new form of worker's compensation legislation was Florida. At that time, Florida had a very small population and no manufacturing jobs. But when Florida politicians decided to try and attract new residents and businesses to the state in 1935, they were forced to adopt the new worker's compensation model.
The new model of worker's compensation-the one in which workers give up their right to sue in exchange for a fixed medical and wage benefit-is still the most beneficial system to both businesses and employees. The money saved in costly legal fees, time saved in court battles and proving employer negligence is substantial and the positive image and reputation of an employer that pays claims willingly rather than fighting against injured employees is valuable beyond measure.