The Evolution of Workers’ Compensation

The Evolution of Workers’ Compensation

Did you know the first traces of workers’ compensation date back to 2500 B.C.?

By Paul Binsfeld, president and founder of Company Nurse, LLC

Today, in the United States, companies are generally required to provide compensation to employees for workplace injury. Most states require that employers purchase some type of workers’ compensation policy. This obligation to a worker’s rights is the result of thousands of years of workers’ compensation disability law evolution, with influences from around the world.

The first traces of workers’ compensation dates back to 2500 B.C. with the adoption of the Law of Ur-Nammu, king of the city-state of Ur, in present-day Iraq. The laws pertaining to workers’ comp stated that employers must provide monetary compensation for injury to a worker’s body part. According to the law, “if a man knocks out the eye of another man, he shall weigh out ½ of mina of silver” or 30 silver shekels. Similar to this system, The Code of Hammurabi, also one of the first written laws in the ancient world, established a disability compensation program sometime between 1795-1750 B.C.

Empires ranging from the Greeks to the Chinese eventually adopted these practices. Laws for specific payments for loss of body parts were enacted. Under Arab law, loss of a joint of a limb was worth one-half the value of the loss of a finger. Compensation was determined by the amount of body part loss and calculated by surface area of that body part. However, between this time and the late middle ages, little development in the law was seen.

English common law, created in the Middle Ages, provided a more detailed interpretation of workers’ compensation laws. Laws observed such as contributory negligence, “fellow servant” rule and “assumption of risk” were all accepted.

Fast-forwarding to late nineteenth century, origins of present day workers’ compensation law were seen in the Employers Liability Law of 1871. During a time of much social unrest, Prussian Chancellor Otto von Bismarck established this law and the Workers’ Accident Insurance program to protect companies from civil suits while providing workers with monetary and medical benefits.

Moving into the 1900s, the United States had their first states introduce the idea of workers’ compensation laws. States such as New York, Massachusetts, Maryland and Montana were the first to try, but failed. Working against the argument of violating the constitutional right of Due Process, all four proposed state laws fell through.

The first complete workers’ compensation laws were passed in Wisconsin in 1911. Followed by nine states passing some sort of workers’ compensation legislation that same year, workers’ compensation was finally becoming an accepted idea. In 1948, Mississippi was the last state to pass laws providing workers’ comp.

During the early years of the workers’ compensation movement in the United States, participation of the programs was optional. Nevertheless, the vast majority of employers, approximately 80 percent, were covered by compensation insurance.

Until the late seventies, the workers’ comp regulations were working off the “fixed benefit” structure. With this system, workers were compensated based off determining factors such as severity of the injury and injury type. They were paid by their assigned schedule, regardless of recovery time or possibility of recovery, with zero regard to changing circumstances.

In 1979, the “wage loss” system was established, in which wage loss was calculated as actual loss of the earnings, rather than a scheduled reimbursement. After this ratification, the common name of “Workman’s compensation” faded out. The new term, “Workers’ Compensation,” which was being adopted by most states because of the influence of the Women’s Liberation Movement, became the norm.

Throughout the next 30 years, workers’ compensation evolved on the basis of what constitutes as “compensable injury.” From the genesis of workers’ compensation to today, the working conditions have changed dramatically. Injuries referred to industrial accidents molded into occupational exposure and overuse syndromes.

In 1990, the Americans with Disabilities Act (ADA) changed the landscape of disability procedures in the workplace. The ADA, created by the Bush Administration, is the enlargement of Section 504 of the Rehabilitation Act of 1973. In this section, it was required that government programs, contractors or any entity that received funding from the federal government make their facilities accessible to the handicapped.  The purpose of the ADA resulted from the hefty campaign to increase the “employability of disabled Americans.” However, ADA far reached Section 504. The ADA incorporates all employers, rather than just employers receiving federal funds.

Since my entry into the workers’ compensation industry 25 years ago, I personally have seen major changes in the industry.  Costs have increased while benefit additions and subtractions have been legislated by states across the country.   In the end, workers’ compensation, a no fault system, is a valuable program which assists injured employees and helps get them back to health while protecting employers from potential litigation.

About Paul Binsfeld

Paul Binsfeld is the founder and president of Company Nurse, LLC, a firm established in 1997 that specializes in medical triage and injury management for workers’ compensation. Binsfeld has over 25 years of experience in the workers’ compensation industry. His early work at the industry’s genesis lead him to become one of the most influential leaders in the workers’ compensation market. For more information, visit www.companynurse.com.