Workers' Compensation

WORKERS' COMPENSATION is the oldest type of social insurance. It is a “no fault” system for offering financial benefits and medical services for those suffering from work-related injuries in an industrialized society where such injuries regularly occur. Unlike tort or negligence law, the goal of workers' compensation is assistance to injured workers and prevention of poverty, instead of resolving disputes or placing blame. The cost of the program is eventually passed on to consumers through insurance premiums included in the cost of production or of doing business.

Modern workers' compensation statutes in the United States have eight common elements: 1) an injured worker is entitled to benefits when suffering from an accidental personal injury “arising out of and in the course of employment” or occupational disease; 2) fault or negligence of the worker does not reduce or impede the right to recover benefits, and the employer's absence of fault or negligence does not reduce employer liability; 3) benefits are available only to employees, not independent contractors; 4) employee wage benefits are normally one-half to one-third the worker's average weekly wage. Additional benefits are medical and rehabilitation expenses and death benefits to dependents with maximum and minimum limits. Only injury causing disability, and thereby reducing earning capacity, is compensable. Accordingly, pain and suffering are not compensated. Therefore, the amount of wage and death benefits is normally much lower than a [Page 1177]court might award in a traditional lawsuit, but workers' compensation is more certain, predictable, and swift; 5) when receiving workers' compensation, a worker and dependents lose their common-law right to sue employers for injuries falling under the statute; 6) a worker may still sue third parties causing the injury, but any financial recovery is first used to reimburse the employer for workers' compensation costs; 7) the state administers the workers' compensation system, and, as opposed to traditional judicial settings, the rules of procedure and evidence are designed to favor awarding benefits; and 8) the employer is required to obtain private or state-funded insurance or meet self-insurance requirements to fund the system without government contribution. In other nations, such as Great Britain, workers' compensation is fully funded by government.

The principle of fixed compensation for certain injuries is found in early Teutonic and medieval English custom. Even pirates on the seas agreed to codes or “articles” whereby crew members received extra payment from captured treasure in predetermined amounts for the loss of specified body parts in furtherance of their plundering. However, the real roots of workers' compensation are traceable to Germany during the Industrial Revolution.

As early as 1838, Prussia enacted measures providing aid to injured railroad workers and passengers. In 1854, the Prussian government mandated that certain industrial employers had to give to local funds to assist ill employees. And in 1884, Chancellor Otto von Bis-marck's program won adoption of the first modern workers' compensation program that became a model for other countries. Unlike later American programs, however, Bismarck's program provided more expansive coverage, required worker contributions, and provided old-age benefits. But like the subsequent British compensation plans, the German system was administered jointly by workers and employers with government oversight.

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