Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain."
While plans differ between jurisdictions, 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, and negligence is generally not an issue in the case. These laws were first enacted in Europe and Oceania, with the United States following shortly thereafter.
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Before the statutory establishment of workers' compensation, employees who were injured on the job were only able to pursue their employer through civil or tort law.[1] 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.
Statutory compensation law provides advantages to employees and employers. A schedule is drawn out to state the amount and forms of compensation to which an employee is entitled, if he/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. Statutes 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.
As Australia experienced a relatively influential labour movement in the late 19th and early 20th century, statutory compensation was implemented very early in Australia. Each territory has its own legislation and its own governing body.
A typical example is WorkSafe Victoria, which manages Victoria's workplace safety system. Its responsibilities include helping employees avoid workplace injuries occurring, enforcement of Victoria's occupational health and rape laws, provision of reasonably priced workplace injury insurance for employers, assisting injured workers back into the workforce, and managing the workers' compensation scheme by ensuring the prompt delivery of appropriate services and adopting prudent financial practices.[2]
Welfare (called Instituto Nacional do Seguro Social - INSS) is the social insurance for those who contribute. It is a public institution that aims to recognize and grant rights to its policyholders. The amount transferred by Welfare is used to replace the income of the worker taxpayer, when he loses the ability to work, by sickness, disability, age, death, involuntary unemployment, or even maternity and imprisonment. During the first 15 days worker’s salary is paid by his employers and after that by Welfare, while inability to work lasts. It is up to 75% of the workers’ wages.
The Brazilian Welfare went through several conceptual and structural changes, involving the degree of coverage, the list of benefits and how the system is financed. If one cannot work, his employer pays for the first 15 days and the Welfare pays from the 16th day on, while he is unable to work. On the other hand, if workers intend to receive compensation from their former employer, there is a time limit for filling a claim (2 years), which must be legally supported. Workers’ compensation laws are the same in the whole country and tend to be protective.
Workers' compensation was Canada's first social program to be introduced as it was favoured by both workers' groups and employers hoping to avoid lawsuits. The system arose after an inquiry by Ontario Chief Justice William Meredith who outlined a system that workers should be compensated for workplace injuries, but that they must give up their right to sue their employers. It was introduced in the various provinces at different dates. Ontario was first in 1915, Manitoba in 1916, British Columbia in 1917. It remains a provincial responsibility and thus the exact rules vary from province to province. In some provinces, such as Ontario's Workplace Safety and Insurance Board, the programme also had a preventative role ensuring workplace safety. In British Columbia, the occupational health and safety mandate (including the powers to make regulation, inspect and assess administrative penalties)is legislatively assigned to the Workers' Compensation Board of British Columbia WorkSafeBC. In most provinces the workers' compensation board or commission remains solely concerned with insurance. The workers' compensation insurance system in every province is funded by employers based on their payroll, industry sector and history of injuries (or lack thereof) in their workplace (usually referred to as "experience rating").
The German worker's compensation law of 6 July 1884[3] — initiated by Prince Otto von Bismarck,[4][5] passed only after three attempts — was the first of its kind in the world.[6] Similar laws passed in Austria in 1887, Norway in 1894, and Finland in 1895.[7]
The Sickness Insurance law paid indemnity to all private wage earners and apprentices, including those who work in the agricultural and horticultural sectors and marine industries, family helpers and students with work-related injuries, for up to 13 weeks. Workers who are totally disabled get continued benefits at 67% after this 13-week period - paid by the accident funds, financed entirely by employers.
The German compensation system has been taken as a model for many nations.
There is no comparable workers compensation scheme in the UK. An employee can pay for permanent health insurance or private medical plans but the UK government does not recognise the need for a rigid insurance scheme of the sort prevalent across the USA and a number of other countries. Work related safety issues in the UK are controlled by the Health & Safety Executive (HSE) who provide the framework by which employers and employees are able to comply with statutory rules and regulations.[8]
With the exception of the following all employers are obliged to purchase compulsory Employers Liability Insurance in accordance with the Employers Liability (Compulsory Insurance) Act of 1969. The current minimum Limit of Indemnity required is £5,000,000 per occurrence. Market practice is to usually provide a minimum £10,000,000 with inner limits to £5,000,000 for certain risks e.g. workers on oil rigs and acts of terrorism.
Employers who do not require Employers Liability Compulsory Insurance are:
"Employees" are defined as anyone who has entered into or works under a contract of service or apprenticeship with an employer. The contract may be for manual labour, clerical work or otherwise, it may be written or verbal and it may be for full time or part time work.
Persons who are not classed as employees and, therefore, are exempt are:-
Employees need to establish that their employer has a legal liability to pay compensation. This will principally be a breach of a statutory duty or under the tort of negligence. In the event that the employer is insolvent or no longer in existence Compensation can be sought directly from the insurer under the terms of the Third Party Rights Against Insurers Act of 1930.
History: see: Workmen's Compensation Act 1897 & following
At the turn of the 20th century workers’ compensation laws were voluntary for a couple of reasons. Specifically, an elective law made passage easier and many felt that compulsory workers’ compensation laws would violate the 14th amendment due process clause of the U.S. Constitution. Since workers’ compensation mandated benefits without regard to fault or negligence, many felt that compulsory participation would deprive the employer of property without due process. The issue of due process was resolved by the United States Supreme Court in 1917 when in New York Central Railway Co. v. White it was held that an employer’s constitutional rights weren't affected. After the ruling most states enacted new compulsory workers’ compensation laws.
In 1855, Georgia and Alabama passed Employer Liability Acts; 26 other states passed similar acts between 1855 and 1907. These acts simply permitted injured employees to sue the employer and then prove a negligent act or omission.[10][11] (A similar scheme was set forth in Britain's 1880 Act.[12])
After Germany's 1884 Act, workers' compensation laws began to be reformed to reduce the need for litigation, and to mitigate the requirement that injured workers prove their injuries were their employer's "fault". For example, The 1897 British Act replaced the 1880 Act.
In the United States, the first state such worker's compensation law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906.[13] (See: FELA, 1908; FECA, 1916; Kern, 1918.) By 1949, all states had enacted some kind of workers' compensation regime.[14] Such schemes were originally known as "workman's compensation," but today, most jurisdictions have adopted the term "workers' compensation" as a gender-neutral alternative.
In the United States, most employees who are injured on the job have an absolute right to medical care for any injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities.[15] Most employers are required to subscribe to insurance for workers' compensation, and an employer who does not may have financial penalties imposed. Texas employers have the unique ability to opt out of the Workers' Compensation system under the original state law written in 1913. However, those employers, known as nonsubscribers, still need insurance coverage in the event of workplace injury. This then is how the nonsubscription industry in Texas began.
In 1995, 44% of Texas employers were nonsubscribers, while in 2001 the percentage was estimated to be 35%.[16] The industry advocacy group Texas Association of Business Nonsubscription claims that nonsubscribing employers have had greater satisfaction ratings and reduced expenses when compared to employers enrolled in the workers’ compensation system.[17] A research survey by Texas's Research and Oversight Council on Workers’ Compensation found that 68% on non-subscribing employers and 60% of subscribing employers - a majority in both cases - were satisfied with their experiences in the system, and that satisfaction with nonsubscription increased with the size of the firm; but it stated that further research was needed to gauge satisfaction among employees and to determine the adequacy of compensation under nonsubscription compared to subscription.[16]
In many states, there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.
Workers' compensation is administered on a state-by-state basis, with a state governing board overseeing varying public/private combinations of workers compensation systems. The federal government has its own workers' compensation program, subject to its own requirements and statutory parameters for federal employees. In the vast majority of states, workers' compensation is solely provided by private insurance companies. 12 states operate a state fund (which serves as a model to private insurers and insures state employees), and a handful have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs or insurers of last resort, and they can only write workers' compensation policies. In contrast, private insurers can turn away the worst risks and can write comprehensive insurance packages covering general liability, natural disasters, and so on. Of the 12 state funds, the largest is California's State Compensation Insurance Fund. The federal government pays its workers' compensation obligations for its own employees through regular appropriations.
The California Constitution, Article XIV section 4, sets forth the intent of the people to establish a system of workers' compensation. This section provides the Legislature with the power to create and enforce a complete system of workers' compensation and, in that behalf, create and enforce a liability on the part of any or all employers to compensate any or all of their employees for injury or disability, and their dependents, for death incurred or sustained by said employees in the course of their employment, irrespective of the fault of any employee. Further, the Constitution provides that the system must accomplish substantial justice in all cases expeditiously, inexpensively, and without incumbrance of any character. It was the intent of the people of California when they voted to amend the state constitution in 1918, to require the Legislature to establish a simple system that guaranteed full provision for adequate insurance coverage against liability to pay or furnish compensation. Providing a full provision for regulating such insurance coverage in all its aspects, including the establishment and management of a State compensation insurance fund; full provision for otherwise securing the payment of compensation; and full provision for vesting power, authority and jurisdiction in an administrative body with all the requisite governmental functions to determine any dispute or matter arising under such legislation, in that the administration of such legislation accomplish substantial justice in all cases expeditiously, inexpensively, and without encumbrance of any character. All of which matters is the people expressly declared to be the social public policy of this State, binding upon all departments of the State government.[18]
It is illegal in most states for an employer to terminate or refuse to hire an employee for having reported a workplace injury or filed a workers' compensation claim. However, it is often not easy to prove discrimination on the basis of the employee's claims history. To abate discrimination of this type, some states have created a "subsequent injury trust fund" which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or to make it anonymous. (See privacy laws.)
Some employers vigorously contest employee claims for workers' compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers' compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant's legal expenses to a certain fraction of an award; such "contingency fees" are payable only if the recovery is successful. In some states this fee can be as high as 40% or as little as 11% of the monetary award recovered, if any.[19]
In the vast majority of states, original jurisdiction over workers' compensation disputes has been transferred by statute from the trial courts to special administrative agencies.[20] Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers' compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer. Ohio allows appeals to go before a jury.[21]
Various organizations focus resources on providing education and guidance to workers' compensation administrators and adjudicators in various state and national workers' compensation systems. These include the American Bar Association (ABA), the International Association of Industrial Boards and Commissions (IAIBC), and the National Association of Workers' Compensation Judiciary (NAWCJ).
In recent years, workers compensation programs in West Virginia and Nevada were successfully privatized, through mutualization, in part to resolve situations in which the programs in those states had significantly underfunded their liabilities. Only four states rely on entirely state-run programs for workers compensation: North Dakota, Ohio, Washington, and Wyoming. Many other states maintain state-run funds but also allow private insurance companies to insure employers and their employees, as well.
Employees of common carriers by rail have a statutory remedy under the Federal Employers' Liability Act, 45 U.S.C. sec. 51, which provides that a carrier "shall be liable" to an employee who is injured by the negligence of the employer. To enforce his compensation rights, the employee may file suit in United States district court or in a state court. The FELA remedy is based on tort principles of ordinary negligence and differs significantly from most state workers' compensation benefit schedules.
Seafarers employed on United States vessels who are injured because of the owner's or the operator's negligence can sue their employers under the Jones Act, 46 U.S.C. App. 688., essentially a remedy very similar to the FELA one.
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