History of Workers’ Compensation Insurance

Did you ever wonder how our modern form of workers’ compensation insurance came to be? Workers’ comp has a longer history than you might imagine. For instance, approximately four thousand years ago, ancient Sumerian tablets outlined specific amounts of compensation for workers who were injured in specific ways, and the specific ways in which these injuries could prevent people from going back to work.

These guidelines for compensation were not unusual in the ancient world; they appeared in ancient Chinese, Arab, Roman, and Greek culture, among others. However, toward the Middle Ages, the system of compensation for injured workers became less defined and depended more on the good will of a lord for his serfs and servants.

Factories during the Industrial Revolution often offered extremely unsafe working conditions—and injuries were common and often devastating. Injured workers were rarely paid by their employers, but they were allowed to sue. However, the standard for proving employers liable was almost insurmountable.

For instance, employers were not liable for worker injuries if the employee was found to be responsible for his own injury, even while working in a dangerous environment or around hazardous machines. If another employee caused the injuries, or if the injured employee was aware ahead of time that there were risks in the workplace, the employer was also not held accountable. In a large number of industries, it was common for employers to require their employees to sign contracts that took away their right to sue altogether.

In 1871, Chancellor Otto von Bismarck of Prussia introduced the Employers’ Liability Law, one of the first systems of social insurance protecting miners, railroad workers, and factory workers in some industries.

In 1906, Upton Sinclair published The Jungle, a searing look at the horrific working conditions faced in Chicago’s slaughterhouse industry. This prompted widespread public outcry, and resulted in the passage of the Employers’ Liability Act of 1906 and 1908.

Near this time, states began to implement their own workers’ compensation programs. These were designed to protect employers more than workers, however; employees with workplace injuries were required to prove that their employer was 100% negligent in contributing to the injury. This was almost impossible, due to numerous “common laws” that provided exceptions to the claim of employer negligence. For example, just one of these exceptions stated that if the worker had known beforehand that injury was a possibility in this job, the employer could not be found liable for the injury.

In 1911, the state of Wisconsin established a program that required employers to pay lost wages and medical bills for workers injured on the job, as long as the workers gave up their right to sue the employer. Other states adopted similar programs, until by 1948 each state had one.

Today, workers’ compensation insurance is usually provided by commercial insurers. However, the government still has a role to play. State labor and employment departments—or specific workers’ compensation departments in some states—exercise quite a lot of regulatory control over commercial workers’ compensation policies.

That said, workers’ compensation is not the same from state to state. There is no federal standard for workers’ compensation plans or requirements that apply to waiting periods, amount of payouts and benefits, and other stipulations. These requirements are usually set on a state-by-state basis. This means that anyone studying workers’ compensation needs to be aware of statewide laws and regulations in addition to how workers’ compensation works in a general sense.

Today, workers’ compensation provides valuable protection for employees injured on the job. Interested in learning more about workers’ comp insurance? Check out our continuing education CE classes on workers’ compensation today.

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