Workers’ Compensation insurance plays a crucial role in providing injured employees with wage replacement and medical benefits. In return, employees relinquish their right to sue their employers for negligence, creating what is known as the “compensation bargain.” This arrangement ensures limited coverage and restricts legal recourse to the Workers’ Compensation system.
The primary goal is to prevent employers from facing insolvency due to hefty damage awards while collectively securing workers’ compensation. These plans, varying across jurisdictions, encompass provisions for weekly payments to replace lost wages (akin to disability insurance), compensation for past and future economic losses, reimbursement for medical expenses (similar to health insurance), and benefits payable to dependents in case of a workplace fatality.
However, it’s important to note that Workers’ Compensation plans do not cover general pain and suffering damages or punitive damages resulting from employer negligence.
The origin of Workers’ Compensation laws can be traced back to Prussian Chancellor Otto von Bismarck, who introduced the Workers’ Accident Insurance system in 1884. This system evolved through Workers’ Accident Laws in Europe and eventually made its way into the United States. International cooperation among policymakers and social scientists furthered the development of global compensation laws.
Workers’ Compensation statutes aim to streamline the process by eliminating litigation and restricting common law remedies. Employees, in exchange for waiving the right to pain and suffering awards, receive monetary compensation to address lost wages, permanent physical impairments, and medical expenses arising from workplace injuries. Dependents of employees who succumb to work-related injuries or illnesses are also entitled to benefits. Legal protections exist for both employers and employees, setting guidelines for various employment scenarios through state statutes and federal regulations.
The remedy provision designates Workers’ Compensation as the primary method for addressing injured workers’ claims, preventing them from pursuing tort liability against their employers.
In the realm of common law remedies, nations developed a system influenced by three key tort defenses for employers: contributory negligence, assumption of risk, and the fellow servant rule. Employers had certain obligations under common law, including providing a safe environment, issuing warnings about potential dangers, facilitating coworker assistance, and enforcing workplace safety rules.
Three defenses protected employers under common law:
- The Fellow Servant Doctrine shielded employers when a fellow employee contributed, either partially or entirely, to the injury.
- Contributory negligence protected employers when employees failed to take reasonable precautions.
- Assumption of risk protected employers when employees willingly accepted work-related risks.
Almost all states, except Texas as of 2018, have adopted some form of compulsory Workers’ Compensation, with organizations having the option to purchase voluntary insurance for both compulsory and non-compulsory coverage. Companies may also opt for self-insurance by demonstrating sufficient funds to cover Workers’ Compensation liabilities. By 1949, every state had enacted a Workers’ Compensation program, with administrative law judges serving as triers of fact for Workers’ Compensation claims in the United States.