case study:Boeing's 737 Max airliners

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The history of compensation for the bodily injury of workers begins as early as 2050 B.C. The code of Hammurabi from 1750 B.C. provided a set of rewards for specific injuries and permanent impairments. Ancient Greek, Roman, Arab, and Chinese law provided sets of compensation schedules, with precise payments for the loss of a body part. For example, under ancient Arab law, loss of a joint of the thumb was worth one-half the value of a finger and the value an ear was based on its surface area. All the early compensation systems consisted of specific rewards for specific injuries. A payment schedule for body parts and function are used in the insurance industry today.

Except from: Guyton, G. (1999). A Brief History of Workers’ Compensation. Iowa Orthopedic Journal.

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The development of English common law in the late Middle Ages and Renaissance provided a legal framework that continued into the early Industrial Revolution across Europe and America. Three important principles gradually developed which determined what injuries were compensable. They were generally so restrictive they became known as the "unholy trinity of defenses”.

An injured worker's only recourse was through the use of torts*. In the nineteenth century as in our own, these were very expensive undertakings. Most countries required high fees just to file a personal injury lawsuit. These were usually were beyond the means of the injured worker. It was so uncommon for a working man to win compensation for injury that private organizations such as the English "Friendly Societies" (referred to as mutual aid societies in Week 2) and German "Krankenkassen" were formed that offered more affluent laborers the option of buying disability insurance. Nevertheless, the worker did occasionally win through tort legislation. As the century wore on, this began to happen frequently enough that employers also became uncomfortable with the high cost of battling civil suits.

*A tort is a civil wrong for which a remedy may be obtained. Basically, a tort is something someone else did wrong that caused you injury and for which you can sue.

Except from: Guyton, G. (1999). A Brief History of Workers’ Compensation. Iowa

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Orthopedic Journal.

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The watershed events in the development of modern workers' compensation law occurred in Prussia under the leadership of Chancellor Otto von Bismarck. Germany at the time had a very active Marxist and socialist movement, and social protection for workers was at the top of their agenda. The active left was a thorn in Bismarck's side, particularly given his need for a stable home front while pursuing foreign empire-building. He resorted to political oppression, and in 1875, he outlawed the Social Democratic Party.

But Bismarck was shrewd and working closely with big industry and aiming to head off the Socialists, implemented the world's first welfare state in the 1880s. While suppressing the institutions of his socialist opponents, he maintained the loyalty of the common Prussian by co-opting key features of their agenda. The most important of these was a system of social insurance with the aim to increase productivity. Although no humanitarian, Bismarck assured passage of the the Employers' Liability Law of 1871, providing limited social protection to workers in certain factories, quarries, railroads, and mines. Later, and far more importantly, Bismarck pushed through Workers' Accident Insurance in 1884 creating the first modern system of workers' compensation.

The system as a whole valued the active worker; the greatest benefits were granted to job-related injuries and medical care and rehabilitation were covered. The state- administered Prussian system also established an important precedent: it was

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regarded as an "exclusive remedy" to the problem of workers' compensation, employers under the system could not be sued through the civil courts by employees.

The Prussian system has served as a basic model for the social insurance programs of a variety of countries including the United States. The complex nature of modern workers' compensation law has been present almost from the start.

Except from: Guyton, G. (1999). A Brief History of Workers’ Compensation. Iowa Orthopedic Journal.

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Other western nations gradually began to accept the notion that modern industrial society required some form of mandated workers' insurance. In 1880, the British Prime Minister William Gladstone pushed through the Employer's Liability Act. This abolished the old common-law defenses in theory, but it did not establish a "no-fault" system. A proof of negligence on the part of the employer was necessary for the employee to collect. Most importantly, "right to die" contracts in which workers renounce their right to sue for injury were still legal and widely used by English industry. Thus, the 1880 law had little effect.

The Workers' Compensation Act was proposed in Parliament in 1893 and was largely equivalent to the 1884 Prussian law in establishing a "no-fault" doctrine of compensation. Unlike the German model, it did not fully rely on state administration. Instead the "Friendly Societies" which had organized various forms of private disability insurance for workers for many years were relied upon to provide the insurance itself. Nevertheless, the Act encountered staunch opposition from manufacturing interests in Parliament, and the House of Lords delayed its passage by attempting to add language which would have made "right to die" contracts a permissible means of circumventing the entire system. Finally, the Act was passed in 1897 after a four-year legislative struggle.

Except from: Guyton, G. (1999). A Brief History of Workers’ Compensation. Iowa

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Orthopedic Journal.

Source: New Jersey Policy Research Organization Foundation. Retrieved from: http://www.njprofoundation.org/pdf/ffd3a.pdf

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Among industrial countries the U.S. was relatively slow to adopt the changes. The federal government generally considered social insurance and welfare to be the purview of the states, so workers' compensation was adopted at the state and not the federal level. The federal government did lead the way in covering its own workforce under workers' compensation with legislation passed in 1908. The vast majority of states adopted workers' compensation laws between 1911 and 1920. New Jersey enacted workers’ compensation legislation in 1911. The last state to adopt was Mississippi in 1948.

The adoption of workers' compensation was popular legislation. It was supported by the major interest groups - employers, workers, and insurers-each of whom anticipated gains from the legislation.

Gains to workers:

Most workers appeared to benefit from the introduction of workers' compensation. Comparisons of the typical payments under negligence liability and payments under workers' compensation suggest that a typical worker injured on the job was likely to receive more compensation under workers' compensation than under negligence liability. Partly this rise was due to the fact that all workers injured under workers' compensation were eligible for compensation; partly it was due to higher average workers' compensation payments when compared with the typical settlement under

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negligence liability. Studies of wages before and after the introduction of workers' compensation show, however, that non-union workers' wages were reduced by the introduction of workers' compensation. In essence, the non-union workers "bought" these improvements in their benefit levels. Even though workers may have paid for their benefits, they still seem to have been better off as a result of the introduction of workers' compensation. Many workers had faced problems in purchasing accident insurance at the turn of the century. Workers' compensation left them better insured, and allowed many of them to spend some of their savings that they had set aside in case of an accident.

Gains to employers:

Employers were also active in pressing for workers' compensation legislation for a variety of reasons. Some were troubled by the uncertainties of the courts and juries applying negligence liability to accidents. Some large awards by juries fueled these fears. Others were worried about state legislatures adopting legislation that would limit their defenses in liability suits. The negligence liability system had become an increasing source of friction between workers and employers. In the final analysis, the employers were also able to pass many of the costs of the new workers' compensation system back to the workers in the form of lower wages. Finally, insurance companies also favored the introduction of workers' compensation as long as the states did not try to establish their own insurance funds.

The video, Workers’ Compensation History, was made by high school students for a national history competition. It is an well-done overview of how this early social insurance program came into existence, the compromises the system is based upon, and continuing conflicts over the program. John Burton Jr. who is interviewed in the video is a professor at Rutgers’ School of Labor and Management Relations and is the leading expert in the field of U.S. workers’ compensation.

Source: Economic History Association and US Department of Labor

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What were the forces that brought about workers’ compensation legislation?

Between 1880 and 1910 as many as 10 – 15 thousand workers died every year at work. Railroad, mining and steel mills were particularly deadly places to work. A realization that uncontrolled work hazards were not good for business began to grow. For instance, in 1889 8,500 US trainmen were killed on the job; in 1895, 6,450; in 1901, 7,350. As we studied in Week 2, during The Progressive Era the growth of unions and mass circulation newspapers and national magazines helped forge a national movement for workers' safety and health. Shocking disasters like the Triangle Shirt Waist factory fire were widely reported, arousing outrage and strong sentiments against these industrial giants.

At the turn of the century American social scientists investigated the workers compensation experiment in Europe, particularly those of Bismarck, while at the same time in the US the “Pittsburg study” of industrial workplace accidents and their impact on families concluded that most industrial injuries could be linked to the environment of the workplace and were often caused by employer disregard. The survey’s findings also concluded that the families of the dead and injured workers were the ones to suffer lasting emotional and financial burdens.

President Theodore Roosevelt agreed with reformers and urged the passing of state

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workers’ compensation laws. Eventually, industry agreed because of a desire to better manage their liability by minimizing injury and death lawsuits; which were both expensive and damaging to business reputations. With Wisconsin leading the way, a majority of states approved such legislation and although labor initially opposed workers’ compensation because it demanded forfeiting the right to sue the employer, eventually labor supported workers’ compensation legislation.

Sources:

Dray, P. (2010). There is Power in a Union: The Epic Story of Labor in America. Double Day, New York.

Guyton, G. (1999). A Brief History of Workers’ Compensation. Iowa Orthopedic Journal.

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The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain".

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Competitive state insurance allows employers to purchase their workers' compensation insurance from either private insurance companies or the state. A monopoly state fund requires employers to purchase their policies through the state's fund. Most states also allow firms to self-insure if they could meet certain financial solvency tests.

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Although not without critics, workers' compensation law was one of the relative success stories of American legislation, benefiting both employers and workers. First, the employer gets tort relief. Second the employee gets a relatively quick, equitable, and predictable no-fault compensation process. Finally, the system is intended to provide an incentive for the rehabilitation of the injured worker.

Criticism from employers is that workers’ compensation is a cumbersome and expensive program to administer. There are also charges of filing false claims and malingering. Criticisms of the worker compensation system from unions and workers include discrimination against workers who file claims, unfair denials and delays of claims, and forcing claimants to use doctors chosen by the employer or the workers’ compensation program.

What do you think? Have you or someone you know filed a workers’ compensation claim? What was the experience like? If workers’ compensation had not been available, what would have happened?

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As you have learned by studying work health and safety cases, the forces of politics, economics, and public opinion (or public apathy) create change over time. This is true of the Great Workers’ Compensation Bargain, too.

This week you will be reading an investigative journalism piece – a collaboration between National Public Radio and ProPublica - on changes in the U.S. workers’ compensation system over the last decade. The findings of drastic cuts in state funding (likened to a “dismantling of the system” by the authors) echo OSHA’s assessment of the current state of workers’ compensation in the OSHA publication “Adding Inequality to Injury: The Costs of Failing to Protect Workers on the Job”.

You can access the article, “The Demolition of Workers’ Comp”, on the Week 7 page in Ecollege. As you read it, consider the following questions:

• Arguments that businesses are unfairly burdened by the cost of workers’ compensation and that lower workers’ compensation costs are necessary to attract and keep new business are countered by unions, workers’ rights organizations, OSHA, and scholars who hold that the costs of workers’ injuries are being off-loaded to the taxpayers through Medicaid, long-term disability payments and other government “safety net” programs. What do you think?

• What forces (who) are driving the changes? What forces are resisting the

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changes? Did this surprise you?

• If you or a family member sustained a serious workplace injury, what would the ideal workers’ compensation system look like? Would you be worried in today’s environment of workers’ comp reform?

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