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Why We Have Workers' Compensation

  • Worker's compensation insurance is a valuable benefit to the modern worker. Yet it has not always been a protection available to workers. How did this important insurance benefit come to be, and how does it benefit the modern worker? Here's a closer look at why America has worker's compensation insurance.


    The History Behind Worker's Compensation Insurance


    The idea of compensating a worker for a work-related injury actually dates back to ancient times. In 2050 B.C., ancient Sumerian law indicated that a worker would be financially compensated for injury to specific body parts based on the value of that part. The Ancient Greeks, Romans and Chinese had similar laws.


    During the Industrial Revolution, the need for workers' compensation laws became quite clear as workplace accidents were commonplace. When workplace injuries in large and dangerous factories became commonplace, getting compensation was not easy. In both Europe and the United States, employers had several ways out of paying for injuries. Specifically, the employer wasn't considered liable if they could prove that the employee's actions caused the injury, prove that a fellow employee caused the injury or show evidence that the employee knowingly accepted the hazard of the work when signing the contract for employment.


    That last stipulation made it almost impossible for injured factory workers to get adequate compensation for their injuries, if any at all. No factory owner would hire a worker without a contract, and signing the contract meant that the employee accepted the risks of the job.


    This all changed in 1871 when Chancellor Otto von Bismarck in Germany, which was still known as Prussia at the time, passed the Employers' Liability Law, which created social insurance for workers. Bismarck followed suit by creating Workers' Accident Insurance in 1884. Yet it wasn't until the early 1900s that the concept arrived in America.


    When Upton Sinclair published his scandalous book The Jungle, which showed the horrendous work experiences of Chicago slaughterhouse workers, the country became alerted to the problem. This led to public outcry and the passing of the Employers' Liability Acts of 1906 and 1908, which removed loopholes employers used to get out of liability for accidents.


    The first workers' compensation law hit the books in Wisconsin in 1911. It wasn't until 1948, when Mississippi created their law, that all 50 states had the laws in place. According to the Social Security Office of Policy, these laws all include "no fault" terminology, which indicates the employer must offer workers' compensation insurance regardless of who was at fault for the accident.


    Why Workers' Compensation Matters


    Why is this so important? According to the Insurance Information Institute, It is important to workers because it ensures that they have the ability to get medical care when they are injured, and also that they continue to get paid when they are off work. Because of workers' compensation insurance, most employees are able to get back on their feet and back on the job. However, when that is not possible, it will cover a portion of the lost income. These policies also pay a premium to beneficiaries if a worker is killed on the job.


    Workers' compensation insurance also provides protection for employers, even though its focus appears to be primarily on the employee. When these policies are in place, employees lose the ability to sue their employers for their workplace injuries. The protection is in place when accidents occur, and the worker cannot hold the employer liable in most situations.


    Workers' compensation insurance is valuable to both workers and their employers. It is important that both understand their rights outlined in these policies, and that they take full advantage of them when needed.