Workers' compensation

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Workers' compensation provides insurance to cover medical care and compensation for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue their employer for the tort of negligence. Employees' compensation laws were first enacted in Europe and Oceania, with the United States following shortly thereafter. Workers' compensation programs were a key component of the labor structure of the former Soviet Union and similar societies.

The intent of workers' compensation is to ensure that all members in the society who put in legitimate time at work, but are injured during the performance of that work, are compensated at a rate that allows them to live within that society with adequate food, housing, clothes, and such essentials. The emergence of workers' compensation reflects the increasing consciousness of the need to care for all members of society, as many human rights issues became prominent. This century marks the age in which the rights of all individuals began to be recognized in cultures around the world, a significant step in the establishment of a world of peace and harmony.

Definition and purpose

Workers' compensation is payment made to an employee by an employer who is injured or disabled in the course of work. This insurance exists to provide some source of income to the families of disabled workers so as to ward off poverty and allow them to maintain a reasonable standard of living. Workers' compensation is particularly important in cases in which the injury is due to the employer's fault such as maintaining an unsafe work environment.


Workers' compensation developed during the Industrial Revolution. During this period the shift from traditional methods of productivity to the use of machinery led to an increased rate of injury for workers. Initially workers could only sue their employees through the courts or subject themselves to welfare.

The first workers' compensation laws arose in Europe in the late 1800s and later spread to the United States and Canada. These laws guaranteed prompt and fair restitution to injured employees and protected employers from expensive, protracted legal battles as workers were prohibited from filing suit after accepting workers' compensation.[1]


Workers' compensation can take a number of different forms. Provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in workers' compensation plans. Cash benefits are established by state formulas with maximum benefit level. The benefits are administered on a state level, primarily by the state department of labor.

These laws are usually a feature of highly developed industrial societies, implemented after long and hard fought struggles by trade unions. Supporters of such schemes believe they improve working conditions and provide an economic safety net for employees. Conversely, these schemes are often criticized for removing or restricting workers' common law rights (such as suit in tort for negligence) in order to reduce governments' or insurance companies' financial liability.

Statutory compensation law

Statutory compensation law provides advantages to both employees and employers. A schedule is drawn out to state the amount and forms of compensation an employee is entitled to, if he or she has sustained the stipulated kinds of injuries. Employers can buy insurance against such occurrences. However, the specific form of the statutory compensation scheme may provide detriments. Statutory schemes often award a set amount based on the types of injury. These payments are based on the ability of the worker to find employment in a partial capacity: a worker who has lost an arm can still find work as a proportion of a fully-able person. This does not account for the difficulty in finding work suiting disability. When employers are required to put injured staff on "light-duties" the employer may simply state that no light duty work exists, and sack the worker as unable to fulfill specified duties. When new forms of workplace injury are discovered, for instance: stress, repetitive strain injury, silicosis; the law often lags behind actual injury and offers no suitable compensation, forcing the employer and employee back to the courts (although in common law jurisdictions these are usually one-off instances). Finally, caps on the value of disabilities may not reflect the total cost of providing for a disabled worker. The government may legislate the value of total spinal incapacity at far below the amount required to keep a worker in reasonable living conditions for the remainder of his life.

A related issue is that the same physical loss can have a markedly different impact on the earning capacity of individuals in different professions. For instance, the loss of a finger could have a moderate impact on a banker's ability to do his or her job, but the same injury would totally ruin a pianist.

Compensation prior to statutory law

Prior to the statutory scheme of the workers' compensation, employees who were injured on the job were only able to pursue their employer through civil or torts law. In the United Kingdom, the legal view of employment as a master-servant relationship required employees to prove employer malice or negligence, a high burden for employees to meet. Although employers' liability was unlimited, courts usually ruled in favor of employers, paying little attention to the full losses experienced by workers, including medical costs, lost wages, and loss of future earning capacity.

Opposition to statutory compensation

Opponents argue that workers' compensation laws may hurt the workers they were designed to help. Large employers may have an incentive to move segments of their business—and their jobs—to areas where workers' compensation benefits (and other employee protections) are less generous or are harder to obtain. These many areas lack a unified and national set of employee entitlements covering minimum wage, wage and hour, or collective bargaining rights in addition to compensation. Labor unions describe this system as a race to the bottom, as state legislatures cut employee entitlements to attract capital. Moreover, applying laws to citizens (or organizations) abroad, is an exception rather than the rule under common law.

Employers in the developed world can also move some operations to other countries where employee entitlements are much lower, and where there may be no workers' compensation or other legal remedies at all for workers who are injured or who are exposed to hazardous substances while on the job. Such countries may also have weaker or no legal protections available for employees in areas such as job discrimination, social security, or the right to organize or to join a trade union.

Some small business owners complain that the cost of workers’ compensation, which they pay in the form of insurance premiums, places a heavy burden on them.

Those in favor of distributism, or the idea that ownership should be spread widely among members of a society, criticize workers' compensation for what it represents. Distributists believe that workers, in fact most people in a society, should have some ownership over their employment and the means of production. As such, workers should have a stake in their place of employment's success. As a result, those workers injured on the job would not necessarily need a new stream of income to replace their lost wages as they would in fact already be profiting from the business as a part owner. Distributists see workers' compensation as emblematic of the disconnect between workers and ownership that they believe should not exist.[2][3]


  1. Workers' Compensation History American Association of State Compensation Insurance Funds. Retrieved February 13, 2008.
  2. Centesimus Anus The Vatican. Retrieved February 13, 2008.
  3. G.K. Chesterton, "The Uses of Diversity," The Collected Works of G.K. Chesterton (Ignatius Press, 1991, ISBN 0898703743).

ISBN links support NWE through referral fees

  • Hood, Jack. Workers Compensation and Employee Protection Laws in a Nutshell, West, 2004. ISBN 031415311X
  • Sall, Richard. Strategies in Workers' Compensation, Hamilton Books, 2004. ISBN 0761827714
  • ———. Behind the Union Curtain: The Battle between Union Workers and Company Doctors. BookSurge Publishing, 2007. ISBN 1419634054
  • Valente, John. Understanding Workers' Compensation: Managing Workplace Injuries and Lowering Costs. Trafford Publishing, 2006. ISBN 1412073383


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