History of Worker’s Compensation

April 30, 2014 7:21 pm

The U.S. Worker’s Compensation is a state program founded in the early 20th century that provides lost wages, medical treatment and rehabilitation services to employees that experience an injury or disease while working. Each state manages it differently. Some benefits are similar, but the details and administrative processes can vary significantly.Image

Germany and England are credited with developing the first state-sponsored employee compensation program in the late 1800s, which eventually expanded west to the U.S.

Worker’s Compensation developed during a time in the U.S. when employers, in most cases, were not compensating employees that were injured or made ill at work. Regulations allowed an employer to avoid compensating the expenses for a worker’s injury or illness if the evidence showed that the fault was partially attributed to the employee or another employee and not entirely the employer’s. The matter would be resolved through the legal system, which would try the case and award a settlement based on the evidence.

The process became cumbersome for employers, and lobbyists devised a plan to create a state-regulated insurance program that handled workplace injury and illness on a no-fault basis that became Worker’s Compensation.

In Worker’s Compensation cases, fault of the harmful cause is not considered, and the worker is protected with partial compensation of earnings and medical costs following an injury and illness. When the compensation is provided, the employee agrees to not file a lawsuit against his or her employer.

The program can be used in coordination with Social Security Disability Insurance. Each state works toward arranging the regulations for both programs to give the disabled employee incentive to return to work. 

The state government and private insurance companies provide Worker’s Compensation insurance to employers, depending on the state regulations. 

Since the Worker’s Compensation coverage compensates an employee for only a portion of the total earnings and medical expenses lost, an employee may retain a supplemental policy that transfers the loss in the coverage gap to an additional insurance company.

The U.S. Worker’s Compensation system has been active for nearly a century, and during this time the reduced liability has prevented costly and time-consuming lawsuits and improved the relationships between employers and employees, contributing to more trust and transparency. 


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