Workers’ Compensation

Workers-compensationWorkers’ compensation is an insurance program that provides pay and medical help for workers who are injured on the job or become ill because of work conditions. Workers’ compensation also provides benefits to the dependents of such workers in cases where death occurs. Loss of income due to accidents on the job has been a major problem of workers since the introduction of machine methods to industry. Today, most industrialized countries have laws or private programs for workers’ compensation.

In the United States, almost all states require employers to provide workers’ compensation coverage for employees. Federal laws provide such coverage for employees of the federal government and certain other workers.

Injured workers normally receive about two-thirds of their salary while disabled. However, most states limit the size of cash payments to any individual. Medical benefits are unlimited. Most states provide training in new jobs for workers who cannot continue in their old work because of injuries. Some states limit workers’ compensation coverage for farm and domestic workers as well as for workers employed in small businesses. In most states, employers pay the full cost of workers’ compensation benefits through taxes or insurance premiums. In a few states, such costs are financed with money from the state’s general fund.

Each state administers its own compensation program, but the level of state agency involvement varies considerably among the states. Federal compensation programs are administered by the Office of Workers’ Compensation Programs in the Department of Labor.

Employers’ liability laws preceded workers’ compensation laws. They made an employer responsible for injuries to workers caused by defective machinery or by negligence on the part of management. In 1880, Britain adopted one of the first such laws.

The first workers’ compensation laws were passed in Germany in 1883. Austria passed similar laws in 1887. Norway, Finland, France, Denmark, and Britain passed such laws in the 1890’s. During the early 1900’s, most other European nations passed workers’ compensation laws.

In the United States, Maryland passed the first state compensation law in 1902. But the U.S. Supreme Court declared the Maryland law and other compensation acts of that decade unconstitutional. The growth of workers’ compensation coverage increased greatly after Congress passed the Federal Employees’ Compensation Act of 1916. This law provided benefits for certain federal civilian workers, or their survivors, in connection with injuries or death on the job.

Ten states passed workers’ compensation laws in 1911. Wisconsin was the first. In 1948, the last of the then 48 states enacted a workers’ compensation program. Alaska and Hawaii had such laws when they became states in 1959. In several states, however, workers’ compensation coverage by employers is voluntary. An average company spends an amount equal to about 2 percent of its payroll on workers’ compensation protection.