A Brief History of Workers' Compensation

Why was Workers’ Compensation Insurance created?

Have you ever wondered, “What is the main purpose of workers’ compensation?” The main purpose of this insurance is to protect employers. Before workers’ comp, employers were being sued out of business by employees, and there wasn’t a program in place to counteract the legal action. 

Workers’ comp insurance gives employees benefits to help cover the cost of a workplace injury or illness. It helps cover medical expenses, lost wages, ongoing care, and funeral expenses.

Because of the benefits provided through workers’ compensation, an employee can’t sue their employer in response to an injury or illness that happens on the job. However, if an employer doesn’t provide workers’ comp for its employees, the business can be sued for damages and must pay for the associated costs. 

When was Workers’ Compensation Insurance created?

Believe it or not, one of the first recorded examples of workers’ compensation dates back to 2050 BCE. There was a law in ancient Sumer that paid workers for their injuries. Similar laws were put in place worldwide, including ancient Greece and China. 

However, workers’ compensation as we know it didn’t start in America until the Industrial Revolution. The Industrial Revolution made manufacturing a large part of the American working landscape. 

Factories were popping up nationwide, and with them, hazardous work conditions were becoming the norm. There were too many people crammed into poorly ventilated spaces while being exposed to dangerous chemicals and high injury risks. 

At this point in American history, if a worker got hurt on the job, they had to rely on the court system to provide compensation. Unfortunately, very few workers were successful in getting that financial help. 

In fact, employers had laws they could rely on to help them avoid liability, known as the “unholy trinity of defenses.”

These laws were:

• Contributory Negligence: Stated an employer wasn’t at fault if there was any chance the employee was responsible for their injury. 
• “Fellow Servant” Doctrine: Prevented employers from being held liable if one worker injured another on the job. 
• Assumption of Risk: Stated that employees knew and accepted the risks involved in a position when applying for a job. 

In the late 19^th century, Europe saw its first set of workers’ compensation laws. Prussian Chancellor Otto von Bismarck put the Sickness and Accident Laws into legislation. 

These laws valued employees in a way the unholy trinity of defenses didn’t. They covered medical care and rehabilitation costs for employees hurt on the job. 

It also made it so that employees could no longer sue their employer if they received workers’ compensation. 

The laws under the Sickness and Accident Laws included the following:

• Employers; Liability Law of 1871: Provided limited protection to workers in factories, quarries, railroads, and mines. 
• Workers’ Accident Insurance of 1884: Created the modern workers’ compensation system. 
• Public Pension Insurance: Gave workers, with non-work-related illness, funds if they were unable to work. 
• Public Aid: Provided a safety net for workers who couldn’t return to work due to a disability. 

It took the United States 37 years for every state to pass its own version of a workers’ compensation law. Wisconsin was the first state to pass a law, while Mississippi was the last. 

Here’s a quick rundown of America’s workers’ comp history:

• 1855: Georgia and Alabama passed Employer Liability Acts, with 26 states following between 1855 and 1907. These early acts let injured employees sue their employer, requiring a trial to prove a negligent act or omission on the employer’s part. 
• 1908: The Federal Employers Liability Act was enacted, giving railroad workers compensation if they could prove negligence resulted in their injury. 
• 1911: Wisconsin was the first state to pass a workers’ comp law with the Wisconsin Workers’ Compensation Act. Nine more states passed their acts in this same year. 
• 1948: Mississippi legislators passed the state’s workers comp laws, making it the last state to do so. 

In the early 1970s, Congress approved the National Commission on State Workmen’s Compensation Laws to see if workers’ comp should be dealt with on a federal level instead of state. By 1972, it was determined to keep workers’ comp at the state level. However, the review led to almost 20 states revamping their workers’ comp laws to make them better for employees.

Reform came again in the 1980s and 1990s as workers’ comp insurance prices continued to rise. Also in 1990, the Americans with Disabilities Act passed, requiring all workplaces to be handicap accessible. This act also gives reasonable accommodation to employees with disabilities. 

To this day, workers’ compensation laws are changed as needed to adapt to the changing workplace. The changes will vary from one state to the next and can be brought into action based on changes in medical technology, workplace options, and more. 

For example, medical advancements have made it possible for some of those on disability to be able to work again, leading to periodic check-ins to see if an employee is still unable to work. Since the COVID-19 pandemic, more employees have begun working from home, leading to updates on how workers' compensation is handled for remote workers. 

What Workers’ Compensation looks like today

Workers’ compensation is still a state-level issue. Because of this, the requirements and processes involved will differ from one state to the next. 

For example, many states don’t require certain employers to provide workers’ compensation coverage. The most common types of employers to be exempt include small employers (with three to five employees), farms, and domestic services (such as those employed in a private home). 

Another decision made on the state level is what is covered under workers’ compensation. This means that one state may allow an injury to be covered while the next state doesn’t. 

For example, Virginia workers’ compensation doesn’t cover treatment for carpal tunnel syndrome in most cases. Other states have stricter guidelines on covering psychological conditions without the presence of a clear physical condition. 

Although the idea of workers’ compensation is to keep employers from being liable for any workplace injuries, there are exceptions to this. 

For example, in New Jersey, an employer can be held liable if the injured employee can prove that the employer intentionally caused harm. In Pennsylvania, the employer is always immune, but subcontractors and product manufacturers can be held liable, depending on the circumstance. 

While workers’ compensation insurance protects employees and employers, the laws can drastically vary from one state to the next. 

For example, Texas is the only state that doesn’t require employers to provide workers’ comp coverage for employees. That’s why it’s essential to read up on the requirements for your state to determine what workers’ comp, liability, and other insurance you may want to have in place for your business. 

Benefits

When an employee suffers a work-related injury or illness, they are entitled to certain benefits depending on the result of the incident. Each state has specific guidelines on the coverage required of employers, but most benefits fall into the same general categories from state to state. 

Benefits from workers’ compensation tend to fall into one of the following categories:

Medical expenses
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Temporary disability 
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Permanent disability
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Funeral benefits
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Dependency benefits
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Vocational rehabilitation benefits
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How to get Workers’ Compensation Insurance today

There are two ways to get workers’ compensation coverage as an employee. Typically, employers will provide the coverage for their employees. However, certain types of work (such as contract work) may ask that the employees provide their coverage. 

As an employer, the insurance company will work with you to determine the number of people you need to provide coverage for and the risk level of the field you work in (expressed through the Ex-Mod) to determine your insurance premium. Workers’ compensation insurance is provided almost entirely by private insurance companies in the United States. 

Learn more about Workers’ Comp with Kickstand

Workers’ compensation was designed with the employer in mind. You’ve put a lot of work into your company, and it’s vital to have protection in place to avoid financial ruin if an employee gets injured on the job. This is why having the right workers’ comp coverage for your company is essential. 

Work with Kickstand Insurance to decide what kind of coverage you need. Your agent can help you find the policy for you and give you a quote for your premium. Each company is unique, and you deserve an insurance policy that reflects that. If you’re ready to get your coverage in place, request a free quote from Kickstand today.