A History of Worker's Compensation in the USA
Worker's Compensation in the 19th Century
In the first part of the 19th century, if an employee was injured at work the only recourse that the employee had was to sue the employer if the employer had failed to meet one or more of its basic common-law obligations. At that time, all employer was required to do was to provide a safe work place with safety rules in place, and to warn employees of any work-related dangers of which they could not reasonably be expected to be aware of.
Employees had difficulty winning suits as common law defences emerged that the employee had assumed a degree of risk by accepting the job in the first place, and that the employer had no responsibility for the actions of other employees. There were no provisions for employees who were killed at work, since their dependants did not have any rights to sue the employer for damages. By the latter part of the nineteenth century it was clear that the system was not working, many workers and their families were being left destitute due to their inability to bring suits for negligence against their employers.
Due to public pressure, many states amended the concept of the defence of contributory negligence to comparative negligence so that employees could be held to be only partially negligent and receive a reduced award. In addition, the defence of fellow employee negligence was modified in many jurisdictions to become a non-delegable duty if the employee responsible for the injury was guilty of avoiding the responsibility given to them by the employer for avoiding accidents.
Worker's Compensation at the start of the 20th Century
Around the turn of the century, many states started to bring legislation into place which allowed descendants of deceased employees to bring action against the employer. However awards were based purely on the financial loss from loss of earnings, and no awards were available for pain and suffering. These changes were undoubtedly an improvement yet the process of accessing the courts for compensation was proving costly and time-consuming. The effect of this was that many employees could not afford to bring suit, and that there was normally a significant time lag before any benefit was paid, during which an injured worker’s family would be left without an income.
The answer to the problem came from a new law that was very different from the common-law approach, in that it was a no-fault law. As long as the workers’ compensation law covered an employee's job, the employer, regardless of who had been negligent compensated the employee. However in exchange for the automatic compensation, the employee gave up the right to bring a suit against the employer for compensatory damages.
At the start of the twentieth century, various states attempted to pass similar laws. But it was not until 1911 in Wisconsin that one was deemed to be constitutional, the others having failed on the grounds that they deprived the employer of the due process of law.
The difference with the Wisconsin law was that the employer had the option to reject the workers’ compensation law, but by doing so they lost the three common law defences. Rather than run the risk of having to face negligence suits without these defences, it was not surprising that the vast majority of employers elected to accept the workers compensation law.
By 1934, all states had passed workers’ compensation laws. As a result of these laws, most workers in the USA today can go about their activities safe in the knowledge that should they be injured, then they and their families will receive workers’ compensation benefits which employers are now required to provide by law.
Worker's Compensation in the USA today
Today's workers’ compensation benefits fall under four categories: Medical Benefits, Disability Benefits, Rehabilitation Benefits, and Death Benefits.
These payments are for the treatment of an injured employee and account for almost 30% of the total workers’ compensation benefit payments. Most state statutes allow for unlimited medical benefits in terms of monetary amounts and the duration of medical payments. With the increasing costs of healthcare, an increasing trend in some states is to enter into agreements with managed care organisations in an effort to contain costs through pre-negotiated discounts.
Disability Benefits are designed to replace the worker’s income or capacity to earn as a result of a compensable injury.
There are four distinct categories:
(i) Temporary Total Disability
Temporary Total covers a worker who is temporarily unable to perform his or her work function while injured or recovering. Benefits are usually in the region of 2/3rds of weekly wages with a minimum and maximum dollar amount.
(ii) Permanent Total Disability
Permanent Total Disability covers a worker who is unable to perform his or her work function for the rest of their life. Benefits are usually expressed as a percentage of weekly wages with a minimum and maximum dollar amount.
(iii) Temporary Partial Disability
Temporary Partial Disability covers a worker who temporarily can still do some work, but cannot perform his or her work function usual work function. Benefits are normally designed to cover the difference between the amount being earned, and what the worker would have earned had no injury taken place.
(iv) Permanent Partial Disability
Permanent Partial Disability covers a worker who can still do some work but cannot perform his or her usual work function and is not expected to recover to the point that they can reassume their full duties.
These benefits are designed to cover medical and vocational rehabilitation for workers with severe injuries.
These are paid if a worker is killed and consist of burial allowances and an income for spouse and child benefit, which is normally expressed as a percentage of the deceased workers' weekly wages.
Regulation of Worker's Compensation
Following a 1917 Supreme Court ruling that states were able to pass compulsory workers compensation laws, today all 50 states as well as American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands have their own workers’ compensation laws.
Whereas each law is aimed at providing no-fault benefits to employees injured at work, each law is differs from others. Most employers comply with these laws by purchasing Workers’ Compensation insurance from an insurance company. Companies that elect to self-insure are still required to adhere to these laws if they are approved as a qualified self-insurer by their state.
State Worker's Compensation laws
Today's state workers’ compensation laws exist to provide statutory benefits for medical expenses, time off work and death arising from injuries and have a number of basic objectives which are as follows:
Protection for the Injured Worker
To provide sure, prompt and reasonable income and medical benefits to work-accident victims, regardless of fault.
Protection for the Injured Worker's Dependants
To provide sure, prompt and reasonable income to the dependants of work-accident victims, regardless of fault.
Providing Peace of Mind
By providing a sole remedy, workers are assured that they will receive a quick settlement if they are injured and that they and their dependants will not have to be without income owing to disputes of liability.
Speeding up the Payment Process
The sole remedy and pre-determined benefits reduces court delays as well as legal costs.
Workers’ compensation laws relieve public and private charities of the need to take care of injured parties in the absence of any compensation.
Encouraging Employer Responsibility
Workers’ compensation laws seek to encourage employers to have an interest in the safety and rehabilitation of employees through appropriate experience-rating mechanisms.
Making the Workplace Safer
Workers’ compensation laws promote studies of the causes of accidents with a view to reducing avoidable accidents and human suffering. In most states an injured employee has the right to bring a common-law suit against an employer, but in doing so they surrender their rights to the compensation benefits. Employees that accept the compensation benefits are required to sign a written agreement releasing the employer, or the insurer, from any further liability.
In a few states the employee is required to give notice that they do not accept the statutory benefits before they have a claim rather than after the event. In cases where employers do not come under the workers’ compensation law of a particular state may voluntarily bring its employees under the law, usually by purchasing workers’ compensation to cover its employees.
Insurance carriers who insure workers’ compensation are required to belong and subscribe to the Rating Bureau in that State, the largest one being the National Council for Compensation Insurance (NCCI). The existence of these rating authorities creates an extremely regulated marketplace since:
(i) Every workers’ compensation policy must conform to the rules, rates, rating plans and policy forms filed or authorised in the applicable state.
(ii)The Bureaux's responsibilities include classifications coding, regulations, rating schedules and policy forms.
In a few states, the workers’ compensation law applies only to certain hazardous occupations, some states exclude casual workers and others exclude employers with less than a specified number of employees. The statutory benefits also differ by state as well as by type of injury.
The U.S. Chamber of Commerce's annual 'Analysis of Workers' Compensation Laws' provides an overview and synopsis of these benefits.
Federal Worker's Compensation laws
Federal Compensation laws exist to provide remedies to employees not covered under state laws. Examples of these are as follows:
Federal Liability Laws
Federal Liability Laws exist to provide remedies to employees that are not subject to state or federal workers’ compensation benefits. Examples of these are as follows:
Also in this section
Reasons to Consider Self-insuring Workers' Compensation
Initial Considerations For Self-Insuring Workers' Compensation
The Information You Will Need to Self-Insure Workers Compensation
Self- Insuring Workers Compensation - The Four Step Process
How Workers Compensation Excess Insurance works
Selecting an Excess Insurer for Workers Compensation