Workers’ compensation systems (also known as workers’ comp in North American English or compo in Australian English) provide for financial compensation for work-related injuries of employees, in particular compensation of loss of wages, sometimes also for medical costs. These laws are usually a feature of highly developed industrial societies. Employees’ compensation laws are often only implemented after long and hard fought struggles by trade unions, particularly in early industrialization. There are often benefits available to dependents of workers killed on the job as well.
Employees’ compensation laws were first enacted in Europe and Oceania, with the United States following shortly thereafter. Workers’ compensation programs were a key component of the labor structure of the former Soviet Union and similar societies.
Compensation prior to statutory law
‘Prior to statutory law, employees who were injured on the job were only able to pursue their employer through civil or torts law.’ In some countries like the United Kingdom this was difficult due to the legal view of employment as a master-servant relationship. Proof of employer malice or negligence was usually required, but difficult for an employee to attain. Although employers’ liability was unlimited, courts usually awarded in favour of the employer, and paid little attention to the full losses experienced by workers: medical costs, lost wages, and damages for loss of future earning capacity.
Statutory compensation law
Statutory compensation law provided a number of advantages to both employees and employers. A schedule is drawn out to stipulate the amounts and forms of compensation an employee is entitled to if he/she has sustained given kinds of injuries. Employers can buy insurance against such occurrences. However, the specific form of the statutory compensation scheme may provide detriments. Statutory schemes often award a set amount based on the types of injury. These payments are based on the ability of the worker to find employment in a partial capacity: a worker who has lost an arm can still find work as a proportion of a fully-able person. This does not account for the difficulty in finding work suiting disability. When employers are required to put injured staff on “light-duties” the employer may simply state that no light duty work exists, and sack the worker as unable to fulfill specified duties. When new forms of workplace injury are discovered, for instance: stress repetitive strain injury silicosis; the law often lags behind actual injury and offers no suitable compensation, forcing the employer and employee back to the courts (although in common-law jurisdictions these are usually one-off instances). Finally, caps on the value of disabilities may not reflect the total cost of providing for a disabled worker. The government may legislate the value of total spinal incapacity at far below the amount required to keep a worker in reasonable living for the remainder of their life.
A related issue is that the same physical loss can have a markedly different impact on the earning capacity of individuals in different professions. For instance, the loss of a finger could have a moderate impact on a banker’s ability to do his or her job, but the same injury would totally ruin a pianist.
Statutory compensation in Australia
As Australia experienced a relatively influential labor movement in the late 19th and early 20th century, statutory compensation was implemented very early in Australia. Current systems of compensation include Work-cover in New South Wales.
Statutory compensation in Canada
Workers’ compensation was Canada’s first social program to be introduced as it was favored by both workers’ groups and employers hoping to avoid lawsuits. The system arose after an inquiry by Ontario Chief Justice William Meredith who outlined a system that workers should be compensated for workplace injuries, but that they must give up their right to sue their employers. It was introduced in the various provinces at different dates Ontario was first in 1915, Manitoba in 1916, British Columbia in 1917. It remains a provincial responsibility and thus the exact rules vary from province to province. In some provinces, such as Ontario’s Workplace Safety and Insurance Board, the program also had a preventative role ensuring workplace safety. In most provinces it remains solely concerned with insurance. It is paid by employers based on their payroll.
Statutory compensation in the United States
Workers’ compensation laws were enacted to make litigation less costly for both sides and to eliminate the need for injured workers to prove their injuries were the employer’s “fault”. The first state law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted some kind of workers’ compensation regime.
This system was formerly known as workman’s compensation, an expression that survives today. Some jurisdictions — such as New York, California, and Texas — have adopted the term workers’ compensation as a gender-neutral alternative.
In the United States most employees who are injured on the job have an absolute right to medical care for that injury, and in many cases monetary payments to compensate for resulting temporary or permanent disabilities.
Most employers are required to carry workers’ compensation insurance, and in most states heavy financial penalties may be imposed on an employer that does not. In many states there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.
In the vast majority of states, workers’ compensation is solely provided by private insurance companies. 12 states operate a state fund (which serves as a model to private insurers and insures state employees), and a handful have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs and can only write workers’ compensation policies, while private insurers can turn away the worst risks and can write comprehensive insurance packages. The federal government funds workers’ compensation for its own employees through regular appropriations.
It is illegal in some states (although not in others) for an employer to terminate an employee for reporting a workplace injury or for filing a workers’ compensation claim. Most states also prohibit refusing employment for having previously filed a workers’ compensation claim. However, employers can consult commercial databases of claims data and it would seem nearly impossible to prove that an employer discriminated against a job applicant because of his or her claims history. To abate discrimination of this type, some states have created a “subsequent injury trust fund” which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or anonymise it. (See privacy laws.)
It is also illegal to falsely claim workers’ compensation benefits. Some employers hire private investigators to videotape claimants surreptitiously; some of these sub rosa videos have shown employees engaging in sports or other strenuous physical activity despite disability. TV shows have recently been made using these videos. However, this evidence may be ruled inadmissible in law courts if it has been taken unlawfully.
Some employers vigorously contest employee claims for workers’ compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers’ compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant’s legal expenses to a certain fraction of an award, payable only if the recovery is successful. However, in certain states this fee is allowed to be as much as 40% or more of the monetary award.
In the vast majority of states, original jurisdiction over workers’ compensation disputes has been transferred by statute from the trial courts to special administrative agencies. Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers’ compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer.
Alternate forms of statutory compensation in the United States
Employees of common carriers by rail have a statutory remedy under the federal Employers’ Liability Act, 45 U.S.C. sec. 51, which provides that a carrier “shall be liable” to an employee who is injured by the negligence of the employer. To enforce his compensation rights, the employee may file suit in United States district court or in a state court. The FELA remedy is based on tort principles of ordinary negligence and differs significantly from most state workers’ compensation benefit schedules.
Seafarers employed on United States vessels who are injured because of the owner’s or the operator’s negligence can sue their employers under the Jones Act, 46 U.S.C. App. 688., essentially a remedy very similar to the FELA one.
Opposition to statutory compensation in the United States
Opponents argue that workers’ compensation laws may hurt the U.S. workers they were designed to help. Large employers may have an incentive to move segments of their business — and their jobs — to areas where workers’ compensation benefits (and other employee protections) are less generous or are harder to obtain. This is because the United States lacks a unified and national set of employee entitlements covering minimum wage, wage and hour, or collective bargaining rights in addition to compensation. Labour unions describe this system as a race to the bottom, as state legislatures cut employee entitlements to attract capital. Moreover, applying laws to citizens (or organisations) abroad, is an exception rather than the rule under common law.
United States employers can also move some operations to other countries where employee entitlements are much lower than in the U.S., and where there may be no workers’ compensation or other legal remedies at all for workers who are injured or who are exposed to hazardous substances while on the job. Such countries may also have weaker or no legal protections available for employees in areas such as job discrimination, social security, or the right to organize or to join a trade union.
Some small business owners complain that the cost of workers’ compensation, which they pay in the form of insurance premiums, places a heavy burden on them.
Economists who favor the distributism system of economics cite workers’ compensation as an example of how far the modern capitalist economic system approaches what they call the “servile state” or “slavery worker” system. They say that in past times when ownership of the means of production were more widely distributed, it would not be natural to hold an employer responsible for a workers injury, since the worker was freely choosing to work for that employer. Distributists assert that in modern times, with the vast majority of people dispossessed of the means of production, requiring employers to have workers compensation shows how much workers really are dependent on being employed and are essentially forced to work for someone else to survive. Some distributists who feel that capitalism is heading unstoppably in the direction of a slavery system, feel that this will come about by workers exchanging their personal freedom for economic benefits like workers’ compensation.