compensation is an insurance program that provides pay and medical help for
workers who are injured on the job or become ill because of work conditions. Workers'
compensation also provides benefits to the dependents of such workers in cases where death
occurs. Loss of income due to accidents on the job has been a major problem of workers
since the introduction of machine methods to industry. Today, most industrialized
countries have laws or private programs for workers' compensation.
In the United States, almost all states require employers to provide workers' compensation
coverage for employees. Federal laws provide such coverage for employees of the federal
government and certain other workers.
Injured workers normally receive about two-thirds of their salary while disabled. However,
most states limit the size of cash payments to any individual. Medical benefits are
unlimited. Most states provide training in new jobs for workers who cannot continue in
their old work because of injuries. Some states limit workers' compensation coverage for
farm and domestic workers as well as for workers employed in small businesses. In most
states, employers pay the full cost of workers' compensation benefits through taxes or
insurance premiums. In a few states, such costs are financed with money from the state's
Each state administers its own compensation program, but the level of state agency
involvement varies considerably among the states. Federal compensation programs are
administered by the Office of Workers' Compensation Programs in the Department of Labor.
Employers' liability laws preceded workers' compensation laws. They made an employer
responsible for injuries to workers caused by defective machinery or by negligence on the
part of management. In 1880, Britain adopted one of the first such laws.
The first workers' compensation laws were passed in Germany in 1883. Austria passed
similar laws in 1887. Norway, Finland, France, Denmark, and Britain passed such laws in
the 1890's. During the early 1900's, most other European nations passed workers'
In the United States, Maryland passed the first state compensation law in 1902. But the
U.S. Supreme Court declared the Maryland law and other compensation acts of that decade
unconstitutional. The growth of workers' compensation coverage increased greatly after
Congress passed the Federal Employees' Compensation Act of 1916. This law provided
benefits for certain federal civilian workers, or their survivors, in connection with
injuries or death on the job.
Ten states passed workers' compensation laws in 1911. Wisconsin was the first. In 1948,
the last of the then 48 states enacted a workers' compensation program. Alaska and Hawaii
had such laws when they became states in 1959. In several states, however, workers'
compensation coverage by employers is voluntary.
In the late 1980's, the total premiums paid for workers' compensation policies were about
$30 billion a year and about 91 million workers were covered. An average company spent an
amount equal to about 2 per cent of its payroll on workers' compensation protection.
Approximately $3 billion in additional funds for workers' compensation benefits were
provided by federal programs.