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The History of Workers' Compensation
Part 2


By Tracy Watson

Tracy Watson became interested in workers’ compensation through his work on getMedLegal Magazine and while earning his paralegal certification.

For Part 1, click here.
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The concept of workers’ welfare takes hold in Britain and influences the U.S.

Although the English Parliament was slow to establish a WC system of its own, Prime Minister William Gladstone pushed for legislation abolishing the oppressive common-law defenses favored by employers with the Employers’ Liability Act in 1880 – but compromised by keeping the death contracts in place. Britain finally repealed that law in 1897, marking the formal beginning of workers’ compensation in England. Gladstone recognized that strengthening the condition of workers “is the record of what we ought to regard as satisfactory, as a real social advance [that] tends to a fair principle of division of the fruits of industry.” During his third premiership in 1891, an increasingly liberal Gladstone said,

“It is a lamentable fact if, in the midst of our civilization, and at the close of the nineteenth century, the workhouse is all that can be offered to the industrious labourer at the end of a long and honourable life. I do not enter into the question now in detail. I do not say it is an easy one; I do not say that it will be solved in a moment; but I do say this, that until society is able to offer to the industrious labourer at the end of a long and blameless life something better than the workhouse, society will not have discharged its duties to its poorer members.”

This inexorable social and economic shift would slowly begin to influence leaders in the U.S., though not on a national level as seen in Europe.
 
otto von bismarck
William Gladstone lobbied for better treatment of workers in his final term as Prime Minister of Britain at the close of the 19th century.
 
The Progressive Era in America begins

At the turn of the 20th century, American companies and corporations were firmly entrenched as the sole determiners of their injured workers’ fate. This period also began what has been described as the “Progressive Era” in both government and social policy reform in America. Although the U.S. was not yet an international power, our presidents and political leaders were well aware of European politics and social reforms, particularly in England. This shift in policies toward workers’ rights started with the presidency of William McKinley and continued with Theodore Roosevelt. One of Roosevelt’s first notable acts as president in 1901 was to deliver a 20,000-word address to Congress asking it to curb the power of large corporations known at the time as “trusts.”

Roosevelt went on to deal with union workers as well. In May 1902, the United Mine Workers went on strike for higher pay wages and shorter workdays. He set up a fact-finding commission stopping the strike, and resulting in the workers getting more pay for fewer hours – but no attention was paid to worker injuries or deaths.

In 1904, muckraking author Upton Sinclair’s seminal book, The Jungle, documented his firsthand accounts of the dangerous, deplorable and inhumane conditions of the meatpacking industry in Chicago. The public was captivated by the grisly descriptions of the hapless workers unfortunate enough to become part of the products they manufactured:

“. . . and as for the other men, who worked in tank rooms full of steam, and in some of which there were open vats near the level of the floor, their peculiar trouble was that they fell into the vats; and when they were fished out, there was never enough of them left to be worth exhibiting,– sometimes they would be overlooked for days, till all but the bones of them had gone out to the world as Durham’s Pure Leaf Lard!”

Sinclair intended to change the way workers were treated by their employers, and instead his book became the impetus for passing laws such as The Meat Inspection Act of 1906 banning misleading labels and preservatives that contained harmful chemicals, and The Pure Food and Drug Act, banning food and drugs that are impure or falsely labeled from being made, sold, and shipped. Despite these small initial successes against companies’ dominance, the government was conspicuously absent on the larger issue of workers injured or killed on the job. Nevertheless, a reform-minded public gradually came to demand changes in workers’ benefits.

   
 

Congress finally begins to weaken employer hegemony
in the courts


Eventually, Congress passed the Federal Employers’ Liability Acts of 1906 and 1908, weakening the common-law doctrine of contributory negligence used so effectively against workers’ claims. Sporadic efforts by individual states to pass comprehensive workers' compensation acts were attempted in New York (1898), Maryland (1902), Massachusetts (1908), and Montana (1909), but none of these state laws specified an actual compensation principle and most simply said to the injured worker, “sue them and prove it.” On the federal level, sentiment for modern workers’ compensation was a few years ahead of the states, but responsibility was generally abdicated to the states. Congress controlled the regulation of interstate commerce – and President Roosevelt urged passing of what is arguably the first substantial compensation system in America in 1908 and enacted it to cover certain federal government employees engaged in hazardous occupational duties as well as employees of common carriers engaged in interstate and foreign commerce.

Unfortunately for America’s workers, the decentralized nature of labor laws in the United States provided an additional obstacle delaying the implementation of any meaningful state regulation. As in England and Germany, many U.S. manufacturers were ready for change only if it included relief from tort claims, but they strongly objected to state-by-state regulation. Corporations argued that state-based reforms would create an unfair advantage for unregulated competitors in neighboring jurisdictions. In the most telling example, manufacturers of phosphorus matches testified before Congress, that despite knowing of the widespread problem of “phossy jaw” poisoning their workers, they were unwilling to invest in alternative solutions unless the law in all states mandated it. This problem led to a conference in Chicago by representatives of the industrial states to create a uniform set of guidelines for compensation law in 1910.

 
otto von bismarck
President Roosevelt pushed Congress to make reforms in how companies in the U.S. treated their workers, and was responsible for the first WC program, for some federal workers, enacted in 1908.
 

New laws allowed injured workers to sue, but failed to make
the workplace safer


By 1910, the majority of states had abolished or substantially limited some of the traditional legal defenses that favored employers since the 19th century, and some had moved to a system of contributory negligence by which injured workers who were partly at fault could still recover some damages. However, some judges still aided the employers by narrowly interpreting the laws in their favor such as claiming a foreman’s contribution to an employee’s injury was irrelevant because he was not a fellow worker. There was no consistent application of the doctrine of respondeat superior. As the courts eventually reduced employers’ defenses, companies became more willing to purchase private accident insurance. Despite the modifications of liability laws by the states, they remained insufficient to induce employers to make the workplace noticeably safer. Industrial accident rates in the U.S. reached their all-time peak in the first decade of the twentieth century. In 1907 alone, over 7,000 workers were killed in just two industries – railroads and bituminous coal mining.

While these incremental changes increased injured workers’ odds of winning in court, they still left workers without much in the way of compensation. For the majority of injured workers and their families, recompense consisted of very little or nothing at all. Those who managed to win in court usually had to wait years from the time of their injury before receiving any payment; it was in the employers’ interest to prolong most workers’ claims in court as long as possible. And even when there was payment, by the time appeals were exhausted, attorneys’ fees, doctors’ fees, and experts paid, the worker received almost nothing for his trouble.
 
Employees who managed to prevail in their claims usually had to wait years before receiving any payment; it was in the employers’ interest to prolong most workers’ claims in court as long as possible.
 
Tragedy fuels the formation of workers’ compensation

It would take a series of worker injuries and tragedies for the government to begin the piece-meal process that would result in the formation of workers’ compensation and protections. One of those inevitable and avoidable tragedies resulting in reform occurred in New York City in 1911. The infamous Triangle Fire on March 25, 1911, killed 146 people, mostly young immigrant women, many of them children. The fire broke out on the upper floors of the 10-story factory, too high for fire department ladders of the day to reach. People gathered on the street below watched in horror as women and men jumped to their deaths to avoid the raging fire. Many of the trapped workers were charred beyond recognition. Typical of the laissez-faire system of American capitalism at the time, there were no laws that required that the owners install safety devices or sprinkler systems. There were no laws that guaranteed workers the right to unionize and engage in collective bargaining. There was no government agency to prevent employers from engaging in unfair labor practices. And no laws to ensure compensation for the injured workers who managed to survive. The owners of the factory just walked away without any criminal penalties, and by the time all the insurance settlements had been paid, they actually made a profit on the fire because they were over-insured. And not one dime had been paid to the surviving employees.

A factory inspection committee established by the New York state Legislature exposed occupational dangers to health and safety in the garment and other industries and motivated it to enact a series of laws and regulations that would drastically reduce the incidences of death and injury. Similar actions were soon taken in other industrial states. Workers' compensation laws were passed over the next several years in response to this and other tragedies, with disability insurance eventually becoming customary. New government agencies were created to specifically oversee the labor conditions of women and children.
 

It would take a series of worker injuries and tragedies such as the infamous Triangle Shirtwaist factory fire in 1911 for the government to begin the slow, piece-meal process that would result in the formation of workers’ compensation laws.
 
The great trade off begins

Although individual states moved a little slower than the federal government, the year 1911 is clearly a watershed moment in the history of workers’ compensation in America. Wisconsin was the first state to adopt a "workmen's" compensation law that was vigorously debated in the legislature. Employers lobbied for what is now known as the “great trade-off.” Through this radical new legislation, employers agreed to provide medical and wage replacement benefits – and in return, the injured employee agreed to give up the right to sue the employer. It was clear that the growing success of worker lawsuits was beginning to be felt by companies and manufacturers; it is estimated that by the time this law was passed, workers were prevailing in court in more than 15% of all claims. Ten more states followed Wisconsin that year, enacting their own "workmen's" compensation laws. Four more states adopted laws in 1912, and eight more passed laws in 1913. By 1948, every state had at least some form of workers’ compensation in effect, including Alaska and Hawaii. Although they did not acquire statehood until 1959, Alaska and Hawaii had passed WC legislation in 1915 while they were still territories. Today, in addition to the 50 states, workers’ compensation laws are in effect in the District of Columbia, Puerto Rico, Virgin Islands, plus the Navajo Nation, the Dominion of Canada, and the ten Canadian Provinces.
 
By 1948, every state had at least some form of workers’ compensation in effect, including the territories of Alaska and Hawaii.
 
 
Some workers are more equal than others

As a practical matter, the patchwork-quilt state-level control of workers’ compensation has led to some unaccountably bizarre variations in policy. For example, workers in small businesses (3-5 employees) are covered in 35 states but not in the rest. A worker who loses a hand because of a workplace accident in Connecticut, Iowa, or New Hampshire is entitled to over $160,000 in compensation. If that same injured worker has the misfortune to live in Alabama, Colorado, or Massachusetts, compensation is less than $30,000. There is no reasonable moral or technical explanation for such disparate treatment of similarly injured persons. The only plausible reasons are historical and political. The common features of the workers’ compensation program among states are the inadequacy of benefits paid and the huge amounts of money frittered away by administrative overhead and byzantine regulations.
 
The common features of the workers’ compensation program among states are the inadequacy of benefits paid and the huge amounts of money frittered away by administrative overhead and byzantine regulations.
 
 
No workers’ comp reform at the federal level is on the horizon

Workers’ compensation has not been left alone at the state level by the federal government because those programs are functioning well or because policy makers wanted to encourage “flexibility” and “innovation.” Far from being innovative, the workers’ compensation programs at the state level quickly became entrenched politically and saddled with fundamentally flawed problems. Over the years Congress has consistently avoided comprehensive reform to workers’ compensation because it was too large a battle to take on, and would certainly jeopardize other policy objectives and agendas. In effect, workers’ compensation laws in the individual states have erected a stubbornly resilient “preemptive policy space,” that effectively blunts federal level involvement.

Not unsurprisingly, significant reform of workers’ compensation has never come close to a vote in Congress at any time during the 20th century, although such reform was considered more than once. Each time, key officials within the executive branch, such as FDR’s Committee on Economic Security, Social Security officials in the late 1930s and 1940s, and White House staff in the Johnson administration in the 1960s, perceived that a fundamental challenge to states’ programs was a political quagmire almost beyond comprehension. They repeatedly observed how poorly states were enacting and managing workers’ compensation laws, and how formidable the various stakeholders were. The fractured history of state-based workers’ compensation influenced federal policy makers’ sense of what was or was not possible. It is noteworthy that a major expansion of the federal government’s authority in regulating workplace safety (OSHA) was assumed more likely of success than a national referendum on workers’ compensation, or even enacting uniform standards for state laws.

Without strong guidance from the executive branch and a willingness (and backbone) to withstand a political firestorm of epic proportions, fundamental change of the WC system at the federal level is unlikely. Proponents and lobbyists for the continuation of state-level control of workers’ compensation have enjoyed an overwhelming advantage in Congress, whose members are particularly vulnerable to geographically disparate attacks from locally powerful lobbies. The only time members of Congress approved changes to workers’ compensation (i.e., the 1969 Coal Miners’ Black Lung program) was when it benefited a tiny subgroup of workers – and would not affect the system of state-level control. Workers’ compensation is essentially the 800-pound gorilla in the room that everyone tries not to annoy and to walk around. It is hard to imagine a better example of the “second face of power” in which actions are never attempted by our elected leaders because the chances of success are calculated to be too low.
 
Workers’ compensation is essentially the 800-pound gorilla in the room that everyone tries not to annoy and to walk around, effectively preventing reform at the federal level.

References
Bachrach, Peter and Morton S. Baratz. 1962. “The Two Faces of Power.” American Political Science Review 56, 4: 947-52.

Michael Barker, Gladstone and Radicalism. The Reconstruction of Liberal Policy in Britain. 1885-1894 (The Harvester Press, 1975), p. 92

Berkowitz, Edward D. 1979. “The American Disability System in Historical Perspective.” In Disabled Policies and Government Programs, edited by idem, 16-74. New York: Praeger.

Fraser, Steve, Fire 100 years ago gave birth to worker rights. Special to CNN.com March 22, 2011

Haller, J.S., Industrial accidents-worker compensation laws and the medical response. Western Journal of Medicine. 1988;148:341–348.

Harger, L.; Workers' Compensation, A Brief History, Florida Division of Workers' Compensation

Howard, Christopher. 2001. “Workers’ Compensation, Federalism, and the Heavy Hand of History.” Wiener Inequality & Social Policy Seminar Series, John F. Kennedy School Of Government, Harvard University

Graetz, Michael J. and Jerry L. Mashaw. 1999. True Security: Rethinking American Social Insurance. New Haven: Yale University Press.

Guyton, Gregory, Iowa Orthop J. 1999; 19: 106–110.

Lubove, Roy. 1986. The Struggle for Social Security, 1900-1935 2nd ed. Pittsburgh: University of Pittsburgh Press.

Rosenbaum, Phillip, The Triangle fire: A blaze that woke a nation. CNN.com. March 25, 2011

Sinclair, Upton. The Jungle. 1904

The Times (12 December 1891), p. 7.


   
 

Tracy Watson is a marketing communications professional and web designer who has worked on getMedLegal’s website for the past six years and also works part time for a law firm as a certified paralegal.
For more about Tracy, click here.

To reach Tracy, email him at
tracy@twdgroup.com

 
tracy watson