Workers' Compensation, A Brief History

Simply defined, workers' compensation recompenses, gives something to a worker, one who performs labor for another, for services rendered or for injuries. This simple definition is taken in part from Webster's Ninth New Collegiate Dictionary and in studying this subject closely, we find this definition extremely accurate. Workers' compensation is not "insurance", rather, it is social insurance, much the same as unemployment compensation and social security. It is however, the oldest form of social insurance.

Insurance, as defined, is coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril. The very word "Insurance" comes from the Latin word for "Security". The word "Policy" comes from the Italian language meaning "Promise". The first evidence of insurance appeared in China around 3000 BC when merchants would divide their cargo into several ships, protecting their investments and dividing any losses among themselves. This system was continued forward and in 1750 BC the Babylonians devised a system where the merchant would borrow money to finance his shipment of goods. He paid the lender an additional sum of money and in exchange for this additional sum, the lender agreed to cancel the loan should the shipment be lost or stolen. This system was recorded in the Code of Hammurabi around 1750 BC. The Romans are credited with developing life and health insurance through guilds or clubs around 600 AD.

Under the various workers' compensation systems, insurance is purchased or provided by employers through individual insurance companies, funds, or self insurance plans to provide the worker with the indemnity and medical benefits required by the laws or acts of the various states or provinces. The Jones Act, Harbor worker’s, Longshoremen's Act, the Federal Workers' Compensation act, are all under governmental regulation and administration but the purpose of these laws are all the same, to compensate the injured worker for loss of wages and medical benefits. All are meant to be self-executing and are constantly changing, but they are still there, protecting not only the worker, but the employer as well and have been for many years.

Moving through history, very little is found regarding workers' compensation, although other forms of protection against the liability of one against another come to light and the term known as "insurance" becomes popular. Common law was the avenue for claims against another. Under liability, the "duty" and "breach of duty" of one to and against another was the rule to follow. It wasn't until the early 18th century that the "respondeat superior" doctrine under "Old English" law came into being. Under this doctrine, the master (employer) was held to be liable for damages to a third person caused by a servant's (employee) act or omission while the servant was acting within the course and scope of employment. Not many workers were protected under this doctrine unless they were injured by a fellow worker. Overall, it was still another step in the right direction.

THE MODERN BIRTH IN EUROPE

Germany took the lead in the protection of injured workers in 1838 by passing legislation protecting railroad employees and passengers in the event of accidents. Further changes were made in 1854 when a law was passed requiring certain classes of employers to contribute to sickness funds and in 1876 a “Voluntary Insurance Act” was passed, which failed in actual operation. Bismarck introduced a Compulsory Plan in 1881, which was enacted in stages and finalized in 1884 and is the model for our present system.

"Workingmen's" Compensation bloomed in England in 1880 when the English Parliament passed the "Employer's Liability Act." Industrialization swept across Europe like a storm in the 1800's. In England, under English Common Law, the injured worker had only one recourse and that was to sue the employer. It was virtually the same system that existed in Germany who, for many years, had been closely allied with England in many business ventures.

ENTER THE LEGAL PROFESSION

Barristers, solicitors and others with legal knowledge and training came forward in increasingly large numbers from 1850 forward and represented the injured workers on a contingency or percentage of what they could collect basis. Although the burden of proof was on the worker as well as other legal expenses, the courts became backlogged and the general public suffered from this unfair and inefficient system as crowded dockets and few judges delayed other civil actions. In the midst of this chaos and confusion, it was noticed that the worker was beginning to prevail in these actions and with the growing legal profession's assistance were tying up attaching machinery, buildings and property of the employers through liens and attachments.

In 1897, England repealed the employer's liability act of 1880 and replaced it with a "workmen's" compensation act. Meanwhile, the storm that swept through Europe during this period of industrialization reached the shores of the United States fueled by the aftermath of the Civil War from 1861-1865.

INTO THE 20TH CENTURY

The northern states in this great conflict geared up for the war through the building of factories to produce various armaments with the iron and steel industries taking the lead. However, it was the garment industry in the New York/New Jersey area that brought attention to the plight of the injured worker. Previously making uniforms for the soldiers of the Union, this industry converted rapidly to the manufacturing of clothing for civilian wear after the war ended. These "sweatshops" paying very little yet demanding high production, became the target for the earliest litigation on behalf of injured workers who were usually paid nothing if they were injured on the job. Safety was nearly non-existent.

Through the 1880's to the turn of the century, the legal profession in the United States was also growing and the increase of lawsuits had the same effect on the judicial system in the United States that it had in England and Germany. First, the crowded dockets, second, few judges to handle the cases and third, and most important to the worker, judgments were rendered in favor of the worker at a steadily increasing rate. By 1908, the workers were winning in nearly 15% of all cases. The American concept of "workmen's" compensation was now based on that of Germany and England's philosophy, that industry is responsible for the costs of injuries inherent in industrial occupations.

The first "workmen's" compensation law passed in the United States was the Federal Employer's Liability act. Covering certain Federal Government employees engaged in hazardous occupational duties as well as employees of common carriers engaged in interstate and foreign commerce. It was adopted in 1908 at the urging of President Theodore Roosevelt. He pointed out to congress that "the burden of an accident fell upon the helpless man, his wife and children" and that this was "an outrage". So it was that the Federal Government took the lead in providing workers with protection in the event of on the job injuries in the United States.

NOT QUITE READY

Prior to 1908, there was an attempt by several states to do something for at least some workers. These attempts were in the form of legislation of employer liability acts. These acts were based on the theory that the employee must bear his own economic loss from an industrial accident unless he could show that some other person was directly responsible, because of a negligent act or omission, for the occurrence of the accident. These acts brought some of the workers into the same arena of litigation as a common stranger and the employer's liability was limited to his own negligence or at most, for the liability of someone for whom he was directly responsible, under the doctrine of Respondeat Superior. Georgia passed their act in 1855 and by 1907, 26 states had passed employer liability acts.

None of these state acts embodied an actual compensation principle and most simply said, "prove it" and sue. In 1902 the state of Maryland came close, passing an act that provided for a cooperative accident insurance fund. Benefits were provided only for fatal accidents and the law was ruled unconstitutional 3 years later. In 1908, Massachusetts passed an act authorizing establishment of private plans for compensation upon the approval of the state board of conciliation and arbitration. This act faded into obscurity soon after passage. New York adopted a workmen's compensation act which was compulsory for certain hazardous jobs and optional for others.

One year later in 1911, the Court of Appeal of New York in the Ives v. South Buffalo Railway Company case ruled the act unconstitutional on the grounds of deprivation of property without due process of law. The state of New York had been a controversial stage for "workmen's" compensation since 1898, when the Social Reform Club of New York drafted a bill to take before the state legislature that proposed compensation for certain types of industrial accidents. Labor unions, strangely enough, were the main opposition mainly because they feared that state control of worker's benefits would reduce the popularity of unions as well as the worker's loyalty. It essentially never got off the drawing board.

"Workmen's" Compensation was on the move; the Federal Government took the first solid step with the Federal Employer's Liability Act, now the states took their turn.

THE GREAT TRADE OFF

The individual states moved a little slower and the year 1911 is most significant in the history of workers' compensation in America. Wisconsin was the first state to adopt a "workmen's" compensation law that was to remain under debate for many weeks. The employers lobbied the state legislator for what is now known as the "great trade-off". Through this legislation, the employer agreed to provide medical and indemnity (wage replacement) benefits and the injured employee agreed to give up his/her right to sue the employer. It was clear that the growing success of litigation was beginning to be felt by the business community. This same year, 1911, ten more states enacted "workmen's" compensation laws. Four more states adopted laws in 1912, and eight more passed laws in 1913. By 1948, all the states had at least some form of "workman's" compensation in effect including Alaska and Hawaii. Although they did not acquire statehood until 1959, they had taken the step to adopt legislation in 1915 when they were territories. Today, in addition to the 50 states, workers' compensation laws are in effect in the District of Columbia, Puerto Rico, Virgin Islands, the Navajo Nation, the Dominion of Canada, and 12 Canadian Provinces. Workers' compensation has become the exclusive remedy for the injured worker. It also protects employers from damage suits filed by the injured worker as well as provides employers with a basis for calculating production costs.

THE FLORIDA EXPERIENCE

Florida moved slowly in enacting a workers' compensation law primarily because Florida had a smaller work force, virtually no manufacturing and no major problems until the "Great Depression" of the 1930's. Florida industry was limited and consisted primarily of phosphate mining, agricultural harvesting of fruits and vegetables, tobacco, cattle and logging. In addition, there was a steady movement of people, mostly unemployed, moving down from the north, seeking their fortune as well as Florida sunshine. Florida started an aggressive campaign to attract business to the warmer, more economical climate in mid-depression and the 1935 legislature meeting in regular session and Governor David Sholtz, who was considered to be a "liberal" and full of "new ideas" recognized the necessity for this legislation. A "workmen's" compensation law was necessary to meet the demands and requirements of the increased and industrial employment in the state and as an inducement and invitation to other industries to move to and operate in Florida. Prospective employers knew that they would be open to lawsuits from workers injured on the job. Most states had adopted legislation entering into the "tradeoff" and now it was Florida's turn. Employers who had been in Florida for many years saw these new residents bring an increase in accidents and injuries. Lawsuits were on the rise and workers demanded protection. President Franklin D. Roosevelt's "New Deal" brought many reforms including "workmen's" compensation.

This new law was signed May 23,1935 as House Bill 29 and became effective July 1,1935. Florida made the headlines across the country several months later on Labor Day, September 1, 1935, when the most vicious hurricane ever to hit North America came ashore and devastated the Keys and coastal areas. The loss of life was in the hundreds with hundreds more missing. Two records were set that day. The barometer recorded a low of 26.35 inches of Mercury and winds blew in excess of 250 miles per hour.

The New Act provided for creation of a new Florida Industrial Commission which began actual operations in June 1935. The commission consisted of three members, two of them appointed by the governor to serve during the governor's term of office and the third member to be appointed by the governor to serve a four-year term and be chairman of the commission.

The Florida Industrial Commission's first chairman was Wendall C. Heaton and he received a salary of $4,200.00 yearly. The Commission was responsible for administering the provisions of the workmen's compensation law, making studies and investigations with respect to safety provisions and the causes of injuries in employment. They were authorized to make rules and regulations dealing with workmen's compensation. The cost of administering the law was borne by a tax on workmen's compensation insurance premiums and upon self-insurers. It is interesting to note that this method of financing the cost of administering the law still exists today.

The way the law was structured regarding benefits to the injured worker is extremely interesting. Initially, no compensation was allowed for the first fourteen days of the disability. Compensation for disability was not to exceed $18.00 per week nor be less than $4.00 per week; provided, however, that if the employee's wages were less then $4.00 per week he shall receive his full weekly wage. Compensation for disability was paid at the rate of 50%, 55%, and 60% of the employee's average weekly earnings, dependent upon the number of dependents of the employee. Medical treatment was furnished at a cost not to exceed $250.00, except in surgical cases in which the maximum expense to the employer was $500.00. Under no circumstances would compensation be paid for more then 350 weeks nor would the total amount paid exceed $5,000.00. The employments not included under the act were domestic servants, agriculture and horticultural farm labor.

In the first year of the Florida Industrial Commission, 10,977 cases on “workmen's” compensation were reported by Florida's 67 counties. Of these, 2,983 were reported in Dade county and 1,985 were reported in Duval County. Benefits paid were approximately $290,434.00.

By 1937, approximately 40,380 cases were handled by the Commission, providing benefits of $963,711.00 to injured employees in compensation and medical treatment. This figure also includes the costs of funerals in the recorded 89 fatalities.

Between 1935 and 1978 few major changes were made in Florida’s workman's compensation system. The first medical fee schedule was adopted in 1938 during the regular legislative session. The special disability trust fund was established in 1955. Also referred to as the "second injury fund", the purpose of the fund is to encourage employers to hire workers with disabilities. The same year, the rehabilitation and medical services section within the Bureau of Workman’s' Compensation was established. In 1960, Florida enacted their own coding and description system. By 1978 Florida adopted, for the first time, a conversion index linking Florida's fee schedule to the Florida Medical Association relative value coding system which was fully adopted and completed by 1981.

A MAJOR OVERHAUL

In 1978, major changes in the state workmen's compensation system were underway in the state legislature, the first major change since 1935. The law had basically been a "fixed benefit" system, with workers paid on the basis of the severity and type of injury related to a fixed schedule of benefits. Those who were able to or even returned to work received lump sum payments while those who could not work were limited to the schedules. This system was replaced by the "wage loss concept" under the new compensation act. Now called workers' compensation instead of “workmen's” compensation, effective August 1, 1979, this new act was to apply to all claims for injury arising out of accidents occurring on or after august 1,1979. The industrial relations commission was abolished on October 1, 1979. After September 30,1979, appeals from orders of deputy commissioners (eventually called Judges of Compensation Claims 10 years later in 1989) were to be heard by the First District Court of Appeal (1st DCA). The Bureau of Workmen's Compensation under the Department Of Commerce was expanded and replaced by the Division of Workers' Compensation under the newly created Department Of Labor And Employment Security, which was vested with extensive powers.

This major reform actually reduced premiums for employers from 1978 through 1982 nearly 23%. They were to be the last reductions for over a decade as the wage loss concept proved not to be the answer to lowering costs.

In 1980, House Bill 1677, as amended by the Florida Senate and passed by the State House of Representatives, was the major legislative cleanup effort. The year of 1981 saw the revised bill for the Workers' Compensation Act. This bill essentially deleted obsolete provisions relating to the Industrial Relations Commission and Deputy Commissioners of Industrial Claims. The Workers' Compensation act of 1986 incorporated pre-1979 and post-1979 concepts, definitions and directions.

By 1988 another major "clean up" effort was the talk of the state Legislators. Consequently, new reforms were adopted in 1989, followed by major changes in the benefit structure during the 1990 session. Also, in 1990, the Bureau Of Workers' Compensation Fraud was established in the Department Of Insurance to combat fraud within the system and the Bureau Of Safety within the Division Of Workers' Compensation was upgraded to full division status to fill the needs of customers for safety inspections and program establishment. The Workers' Compensation Drug Free Workplace Program was added to the law this same year recognizing the role that drugs and alcohol played in accidents on the job.

TODAY

We have seen wage loss come in 1979 and go in the 1993 reform, replaced by impairment income and supplemental benefits. The closing years of the 20th Century brought many changes especially as litigation and medical care continued to be a problem not only in Florida but on a national level as well. The 1993 reform act introduced our system to Managed Health Care Arrangements (MCA’s). The Employee's Assistance Office (EAO), designed to prevent litigation through education, information, and the Early Intervention Program and to resolve disputes quickly and effectively, became a reality. In addition, the Employer Help Line, known today as the Customer Information and Services, was established to assist employers and other customers with their questions and problems. In the 1993 Reform Act the emphasis was, and still is today, placed on reemployment, getting the injured worker back to work as soon as able, therefore reducing costs and increasing productivity.

Now, in 2003, our law again underwent a major reform, with changes to the Permanent Total, Impairment Income and Death Benefit structures, construction industry exemptions, compliance enforcement, medical services, as well as examination and investigation of carrier and claim handling entities.

The Division of Workers' Compensation through reorganization continues to emphasize education and information both externally and internally to all customers the Division serves. Through outreach programs, workshops, conferences, seminars, brochures, pamphlets and other materials, the Division’s customers will better understand and take a pro-active role in improving the system.

THE FUTURE…

We are just a few years into 21st Century and have already seen sweeping changes with the abolishment of the Department of Labor and Employment Security, the Division of Safety and the Special Disability Trust Fund. The Agency for Health Care Administration was elevated to full Department status in 2001 and received the Medical Services portion of the Division of Workers’ Compensation in February 2001with permanent transfer effective July 1, 2002. The Reemployment section transferred to Department of Education, Division of Vocational Rehabilitation with the remainder of the Division moving to Department of Insurance also effective July 1, 2002. Department of Insurance and Department of Banking and Finance merged into the new Department of Financial Services effective January 1, 2003.

Yes, there will be changes as we progress into this new century, but workers' compensation is still here for the citizens of Florida

HISTORY OF WORKERS' COMPENSATION TIMELINE

10th Century B.C. Kings and Temples and Book of Genesis, first possible indication of a form of "workman's" compensation
1855 United States, Georgia passes Employer Liability Act in the state legislature. 26 other states pass similar acts between 1855-1907. These acts were simply permission to sue the employer if employee proved a negligent act or omission.
1861-1865 United States Civil War, Industrialization in the North for the war effort. When the war ends, factories convert from manufacturing uniforms to regular clothing. Birth of the infamous "sweatshops".
1880 England, Parliament passes "Employer's Liability Act".
1884 Germany passes "Industry Compensation Act".
1897 England repeals "Employer's Liability Act" and replaces with a "Working Man’s Compensation Act".
1898 New York, the New York Social Club drafts a bill for "Partial Compensation for Workers". No action taken by state legislature. Largest opponent is labor unions.
1901 Maryland passes legislation for a "Cooperative Accident Insurance Fund".
1905 Maryland Act ruled "unconstitutional" by state Supreme Court.
1908 Massachusetts passes legislation establishing private plans for compensation. Never signed by the governor and passed into obscurity.
1908 Federal Employer's Liability Act passed by the U.S. Congress at the urging of President Theodore Roosevelt. This is the first "workman's" compensation
Law in the United States.
1910 New York, legislature passes a partial "workman's" compensation act.
1911 New York Court of Appeals rules that the act is "unconstitutional".
1911 New York, Triangle Shirtwaist Company Fire in New York City, over 146 workers jump to their deaths to escape fire in 10-story building. Exits were blocked, many law suits. Entire nation shocked at this tragedy. New York City immediately adopts first safety codes.
1911 Wisconsin becomes first state in the union to adopt a true "workman's" compensation law. Called the "Great Trade Off"; employers provide coverage, employees give up right to sue.
1911 Triangle Shirt Waist Company Fire in New York City, Workers, mostly female immigrants trapped in 10 story building, 146 jump to their deaths. Major safety reforms sweep New York and the country.
1912 Four more states pass laws.
1913 Eight more states adopt legislation.
1915 Alaska and Hawaii pass "workman's" compensation laws even though they are only territories.
1935 Florida passes "Workman's" Compensation Law".
1938 First Medical and Surgical Fee Schedule
1948 All states in the union have "Workman's" Compensation Laws.
1955 Special Disability Trust Fund created.
1955 Rehabilitation and Medical Services Section established in the Bureau of “Workman's" Compensation
1979 Florida, first major reform since 1935. "Workman's" Compensation now called "Workers” Compensation; many sweeping changes; wage loss concept adopted replacing fixed benefit system. Division of Workers’ Compensation
established within the new Department of Labor and Employment Security
1990 Florida, additional reform, Bureau of Workers' Compensation Fraud established in Department of Insurance, Division of Fraud
1990 Florida, Drug-Free Workplace added to law, first in the United States.
1990 Bureau of Safety in the Division of Workers' Compensation upgraded to full division status within the Department of Labor and Employment Security.
1993 Florida, Major Reform Act, Wage Loss eliminated, new Impairment Income and Supplemental Benefits, Managed Care, Chiropractic care limits, Employee Assistance and Ombudsman Office created along with other changes.
1999 Special Disability Trust Fund abolished by Legislation. Division of Safety also abolished effective July 1, 2000.
2000 Department of Labor and Employment and Employment Security abolishment begins with various Divisions including Jobs and Benefits and Unemployment Compensation renamed and transferred to other State Agencies.
2002 Abolishment of the Department of Labor and Employment Security completed through Legislation. Agency for Health Care Administration (AHCA) receives Medical Services section of Division of Worker' Compensation Bureau of Rehabilitation and Medical Services. Rehabilitation portion transferred to Department of Education. Remainder of Division transferred to Department of Insurance effective July 1, 2002.
2003 Department of Insurance and Department of Banking and Finance merge into one new agency, the Department of Financial Services effective January 1, 2003.
2003 Major Reform Act, changes to Permanent Total Disability, Permanent Total Supplement, Permanent Partial Benefits, Practice Parameters and Protocols mandatory in medical care, changes to Independent Medical Examinations, Attorney Fee Award structure, Compliance, Exemptions, elimination of Supplemental Benefits and other Legislative changes.

Written by Lloyd Harger, Division of Workers' Compensation