Insureon Blog

A brief history of workers’ compensation

6. May 2014 08:35

Old-fashioned illustration of workers setting rails

[Updated March 29, 2019]

Ever wonder how workers’ compensation insurance came to be? Monetary compensation for an injury is an ancient concept – but it took a surprisingly long time for the United States to embrace it.

A 4,000-year-old idea

Ancient Sumer – present-day Iraq – was perhaps the first to implement workers' compensation. In 2050 B.C., ancient Sumerian law outlined compensation for injury to a worker’s specific body parts, according to Gregory Guyton’s "A Brief History of Workers’ Compensation." For example, the loss of a thumb was worth half the value of a finger.

Ancient Greek, Roman, and Chinese laws implemented similar systems for specific injuries and the monetary compensation the maimed parts deserved. Their distinction between impairments (the loss of function of a body part) and disabilities (the loss of ability to perform certain tasks) still informs workers’ compensation laws today.

'Death contracts' and other roadblocks

The rise of the Industrial Revolution meant extreme working conditions in early factories. Hazards were plenty, and injury rates were colossal. Though hurt workers rarely received compensation, they could turn to the courts for help.

However, the legal framework for compensating injuries was exceptionally restrictive – so restrictive that the following principles became known as the “unholy trinity of defenses.” If the employer could prove these to be true about the injury, the worker couldn’t claim any compensation:

The rise of Realpolitik in Prussia would usher in the end of these dark times for workers. Chancellor Otto von Bismarck implemented a system of social insurance, known as the Employers’ Liability Law of 1871. This provided some social protection for workers in certain factories, quarries, railroads, and mines.

In 1884, Bismarck championed workers’ accident insurance, which laid the groundwork for workers’ compensation insurance in the United States.

Workers’ comp trickles to America

The trend toward compensating workers for occupational injuries did not come quickly to the United States. It took Upton Sinclair’s 1906 novel "The Jungle," which details the horrors of Chicago slaughterhouses, to stir the public’s outrage.

Eventually, Congress passed the Employers’ Liability Acts of 1906 and 1908, which made contributory negligence doctrines less restrictive. Between 1898 and 1909, New York, Maryland, Massachusetts, and Montana attempted and failed to pass workers’ compensation acts.

Wisconsin passed the first comprehensive workers’ compensation law in 1911, while Mississippi was the last state to jump on board in 1948. These early laws required employers to provide medical and wage replacement benefits for injured workers. If the injured employee accepted these benefits, the employer could not be sued.

Today, this basic structure for workers’ comp is essentially the same. Most states require employers to carry workers’ compensation insurance for full- or part-time employees. You can learn more about your state's laws in the guide "Workers' compensation insurance laws by state."

Why workers’ compensation matters

Workers’ compensation insurance is a necessary safeguard for the present-day workforce. This insurance and its legal requirements are designed to protect employees from risking their health, safety, and assets for their jobs.

Worker’s comp can provide coverage when:

Employers are protected from the high cost of occupational injuries and the employer benefits, too. Most workers' comp policies include employer’s liability insurance, which covers the cost of an employer's legal defense, settlements, or judgments when an employee sues over a work injury.

Employers can also cover themselves with a workers’ comp policy to guard against the risk of suffering a work injury or illness. To learn more about workers' comp costs, read our "Workers' comp insurance quote analysis."

Compare workers' comp quotes

Insureon helps small business owners compare quotes for workers' compensation and other types of business insurance with one easy online application. Start an application today to protect your employees and your business.

Tags:

Risk Management | Small Business | Small Business Risk Management | Tips for All Small Businesses | Workers' Compensation Insurance

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