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A Brief History of Workers Compensation

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Workers compensation is the country's oldest form of organized insurance for workers injured on the job, dating to before the Social Security Administration's creation. The following is a brief history of workers compensation that touches on its origins, evolution and modern framework and includes some basic definitions of terms.

Origins of Workers Compensation

Even a brief history of workers compensation would be incomplete without a mention of its origins in the 19th century. In response to the increasingly dangerous work environments found in the steel and textile mills that blossomed during that period, by 1900 the majority of American states had passed laws allowing workers to sue their employers for injuries arising out of perceived negligence.

By the early 20th century, however, it became clear that merely permitting employees to initiate torts against their employers was not enough, and states began setting up agencies to investigate claims and recover monies from negligent employers for distribution to temporarily injured workers.

An Emerging Right to Care

As time went on, the standard of an "absolute right" of workers injured in workplace accidents to medical treatment in other words, to have all or most medical bills paid for by workers compensation insurance became accepted practice. 49 states have laws requiring employers to carry workers compensation insurance both to cover these bills and to partially compensate workers for lost wages ; although Texas allows its employers to opt out of such coverage, they must still carry insurance to protect against potentially crippling lawsuits in the event of a workplace injury arising from negligence. Employers who do not carry workers compensation insurance are subject to heavy financial penalties.

No two states' workers compensation systems are alike. Most states require employers to purchase insurance, which can be relatively cheap or very expensive depending on the employer's business, through private companies.

There is very little federal oversight for workers' compensation programs, although, in an effort to lessen the burden on states, the federal government does maintain a separate insurance fund for its own employees regardless of where they live and work.

Current Standards and Practices

Two developments, the rapid growth of the national workforce and the continued passage of new employee-rights legislation, have fueled an increase in the number of workers' compensation claims made each year. To handle such high claim volume and reduce the burden on their court systems, states now have agencies dedicated exclusively to the issue.

Workers compensation cases only reach the trial courts in the event of a dispute that cannot be resolved through mediation, a catastrophic injury that may result in permanent total disability, or a major negligence claim that affects many workers at once. Several smaller states have also privatized their workers compensation agencies in recent years, essentially establishing private trust funds for injured workers. More may do so in the future.

Some exceptions exist. Special laws permit injured railroad and shipyard workers to receive compensation from their employers through federal courts. Special rules also apply to worker injuries at sea, coalminers, and federal employees, among others.