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The History of Workers' Compensation
Part 1
By Tracy Watson
Tracy Watson became interested in workers’ compensation
through his work on getMedLegal Magazine and while earning his paralegal
certification.
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California workers’ compensation
is a vast system with more than 300,000 claims annually in the state
and billions of dollars paid in benefits. In recent years, California
employers’ tab for insurance premiums ran between $6 billion
and $9 billion a year, excluding the cost for firms self-insuring
their workers (who account for approximately 30 percent of the claims
in the state).
The WC system has been widely criticized (as regular
readers of getMedLegal Magazine can attest) for providing minimal
compensation at high costs. To describe the myriad procedures as
stupefyingly complicated is an understatement. Despite the benefits
to what amounts to a no-fault system, companies still complain that
the system is too litigious. Compared to the alternative that existed
80 years ago, the baseline safeguards to life, limb and the economy
are generally worth the trade-offs. Even though the WC system is
ridiculously cumbersome, it is vital to all industrialized nations.
Warts and all, this system prevents what would likely be both the
collapse of our legal system, and most companies as well.
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Even though the workers’ compensation
system is ridiculously cumbersome, it is vital to all industrialized
nations. |
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Workers' Comp
– it's much older than most people think
Ask the average worker in the U.S. when they think workers’ compensation
began, and many will logically place its origin at the beginning of the industrial
era in the late-19th century. Most people express surprise when informed that
WC did not originate in the U.S., and has been around for over 3000 years. The
practice of compensating injured workers actually dates back to ancient Sumeria
as documented on stone tablets. In approximately 2050 B.C., the laws of King
Ur-Nammu provided payment for injuries to workers’ specific body parts,
including broken bones. Several hundred years later, the legendary code of Hammurabi
from 1750 B.C. details a similar set of compensation schemes for specific injuries
and even their future permanent loss of function. As late as 600 A.D., Roman
society developed both life and health insurance through guilds and clubs, although
such policies were the province of the affluent, not the rank and file worker.
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Workers’ compensation has
been around for over 3000 years.
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Other ancient laws including those from the Persians, Chinese,
Greeks, and Romans provided sets of workers’ compensation
schedules, many with payment for the loss of a body part.
The ancient Persians showed remarkable prescience by creating
what can only be described as an apportionment schedule:
losing a joint of the thumb was valued at half of a finger,
and for those jug-eared workers, payment was based on the
size of the ear. Size was also a factor in payment for
the loss of the male appendage. The hapless worker was
compensated by the amount of length lost (yes– there
really was a schedule for “penis apportionment”).
There were additional variables such as slaves’ losses
(they were property) not compensated as much as those of
free men. The common thread among these ancient compensation
plans was the limitation to awarding payments for particular
injuries. However, it would take another two thousand years
for the concept of separating impairment from loss of a
body part to arise.
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| Ancient compensation schedules from
antiquity eventually were replaced as the empires dissolved leading
up to the Middle Ages. From the post-Roman era through the 18th century,
feudalism and kingdoms increasingly became the “structure” of
government in most of the world. The arbitrary nature of a King’s
or Lord’s beneficence dictated what injuries were worth compensation.
This concept of payment was tied to the doctrine of “noblesse
oblige”: the care noblemen would bestow on injured servants
was solely at their discretion. History clearly shows us there was
not much sense of obligation demonstrated by these rulers. |
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The Advent
of Common Law and the Industrial Revolution
Our system of English common law began in the late Middle Ages
and developed through the 17th century, establishing a legal framework
that endured well into the early 1800s. Workers in Europe and America
were subject to three principles so constraining and anti-worker,
they became known as the “unholy trinity” of defenses
wielded with impunity by employers: assumption of risk, the fellow
servant rule, and contributory negligence.
Assumption of risk
This far-reaching doctrine simply said that employees “knew” what
they were getting into by agreeing to the employment and any inherent
risks that job might have. Companies were merely required to provide
only the safety measures accepted in that general industry. In the
19th century, this often meant whatever they deemed appropriate --
which was likely little or nothing. At the start of an employee’s
tenure, many companies demanded contracts where workers forfeited
their right to sue for an on-the-job injury or death. These became
known as the “worker's right to die,” or literally, “death
contracts.”
The “fellow servant” rule
In an astonishing shift of blame under this rule, companies or employers
were not liable if the worker’s injuries resulted in any part
from the acts or negligence of a co-worker. This oppressive scheme
was established in Great Britain in 1837 through the case of Priestly
v. Fowler, (1837) 3 Mees & Wels. 1, involving a butcher
boy suing his master for the cost of his injuries. Five years later
the court in Farnwell v. Boston and Worcester Railroad
Company, 45 Mass. 49
(Mass. 1842) helped bring this “contract rule” to the
United States by siding with the railroad’s contention that
compensatory damages would create a “moral hazard” in
the workplace and that the injured worker was in as good a position
as his employer had been to monitor the work of his fellow workers.
The concept of “respondeat superior” in the workplace
would not occur in the U.S. for another 70 years.
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Workers in Europe and America
were subject to the “unholy trinity” of defenses: assumption
of risk, the fellow servant rule, and contributory negligence.
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Contributory negligence
If a worker was in any way responsible for his injury, this principle held the
employer blameless. No matter how dangerous exposed equipment might be, a worker
who lost fingers, limbs or life was not entitled to any payment whatsoever.
This type of “blame the worker” U.S. case law was established in
an accident where a freight conductor fell from a moving train due to faulty
equipment in Martin v. Wabash Railroad, 142 F. 650 (1905). In particularly
twisted judicial reasoning, the worker was not awarded compensation because
inspecting the train for faulty equipment was one of his job duties -- despite
the fact that other inspectors found a loose handrail was to blame.
Much like today, one of the main barriers to a worker seeking compensation in
the 19th century was the court system. Once injured, a worker’s only means
of pursuing a claim against a company was to file a lawsuit. In the 1800s the
immoderate costs associated with filing such a suit were well out of reach of
the common worker. It was a foregone conclusion that any employee filing a claim
against the company would be fired immediately, further worsening an already
bad situation. The outcome of most 19th century lawsuits were so lopsided in
favor of employers, private associations such as the English “Friendly
Societies” and German “Krankenkassen” were created to assist
more well off laborers with the option of actually purchasing various types of
disability insurance.
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| It was a foregone conclusion
that any employee filing a claim against the company would be fired
immediately. |
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The Modern WC System Begins in Prussia
Not long after some of the oppressive 18th and 19th century court cases established
an almost total lack of accountability of companies to their employees, Britain
passed the Factory Act in the 1840s and introduced the concept of safety regulations
and the possibility of compensation to injured workers. This legislation did
very little to change the circumstances of England’s workers, and meaningful
reform in Britain would not occur for nearly a half century.
Meanwhile, over in
Prussia (the
German Empire), the first step in the protection of injured workers was begun
in 1838 with laws protecting railroad employees and passengers in the event of
an accident. The Empire struck back with another gain for workers in 1854 with
legislation requiring certain types of employers to contribute to employees’ sick
time accounts.
Less than two decades later, in a classic case of unintended consequences, Chancellor
Otto von Bismarck inadvertently created the seminal system that became the workers’ compensation
model adopted by most countries in the industrialized world.
At the time, the growing Marxist and Socialist movements within his country were
putting a crimp in the good Chancellor’s desire to expand the Prussian
Empire. Although he outlawed these political parties to further his grand plans,
he also wanted to have some worker stability and social protections to quell
dissent. As an adherent of Realpolitik (political pragmatism), Bismarck did what
any politician in power does to maintain some semblance of loyalty – he co-opted
some of the opposition’s agenda. First, he instituted the Employers’ Liability
Law of 1871 to provide a modicum of social protection for workers in key industries
such as railroads, mining, quarries and factories. Bismarck then went on to create
Workers’ Accident Insurance in 1884, followed by Public Pension
Insurance – providing a stipend for workers incapacitated due to non-job
related illnesses, and Public Aid, providing a safety net for those who were
never able to work due to a disability.
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In a classic case of unintended consequences, Chancellor Otto von Bismarck
inadvertently created the system that became the industrialized world’s
model for workers’ compensation. |
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Most importantly, Bismarck’s system of state-administered control
was ultimately regarded as the exclusive remedy for injured
workers: employers in this system could no longer be
sued by their employees in the civil courts. Ironically, Bismarck’s
attempt to quash his opposition by adopting some of their ideas resulted
in a demonstrable improvement in many workers’ lives. As a
system of state control, the Prussian system was deliberately complex
from the start. Many of the bleak stories of Franz Kafka were inspired
by his employment in the early 1900s as a minion in the byzantine
Prussian workers’ compensation board. Sadly, the culture of
obfuscated regulations and procedures lives on in today’s workers’ compensation
boards.
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The WC concept
spreads in Europe
Although their close business trade with Prussia meant Britain had
many of the same systems in place, the radical idea of compulsory
workers’ insurance was slow to spread to England for most of
the 19th century. Beginning in the 1850s, barristers, solicitors
and other enterprising individuals with legal knowledge and training
came forward in increasingly large numbers; what started as a small
number of lawsuits on behalf of injured workers, became a huge liability
for the courts within just a few decades.
The English courts became horribly backlogged, with the public suffering
from this unfair and grossly inefficient system, resulting in delays
of other civil actions. In the midst of crowded dockets and general
confusion, companies began to realize that some workers were actually
prevailing in these lawsuits and with the maturing legal profession’s
assistance – through liens and attachments – they were tying up
machinery, buildings and the property of employers. British employers
were beginning to understand that their liability would only grow
with each successful lawsuit. Although Parliament did not move quickly
to establish a WC system of its own, Prime Minister William Gladstone
pushed for legislation abolishing the oppressive common-law defenses
favored by employers. The Employers’ Liability Act of 1880
compromised by keeping the death contracts in place. Britain finally
repealed that law, and despite huge opposition from manufacturing
interests, in 1897 Parliament enacted legislation modeled on Prussia’s
system. This marked the formal beginning of workers’ compensation
in England. It would take more than 10 years for this watershed social
and political change to affect American business law.
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Gerdes DA. Workers' compensation, an overview for physicians. South Dakota
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Steinberg F. The law of workers' compensation as it applies to hand injuries.
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Schäff S, Whelan S. Constructing Franz Kafka.
Findings and Recommendations on California's Permanent Partial Disability System
(1997); Stern, Peterson, Reville, Vaiana
Harger, L.; Workers' Compensation, A Brief History, Florida Division
of Workers' Compensation
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The radical Prussian idea of
compulsory workers’ insurance was slow to spread to England
for most of the 19th century.
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Tracy Watson is a marketing communications professional
and web designer who has worked on getMedLegal’s website for
the past six years and also works part time for a law firm as a certified
paralegal.
To reach Tracy, email him at
tracy@twdgroup.com |
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In the next
issue: Workers’ Compensation
lands in America
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