Workers' Compensation in America is a state managed system for providing benefits to individuals and families victimized by industrial accidents. The system provides a death benefit for families who lose a member, and also medical, income replacement and rehabilitation benefits to injured workers. Each state has its own Workers' Compensation law and there is accordingly variability in benefits from one state to another. In some states vocational rehabilitation services are a central aspect of the workers' compensation law, and in other states a far more limited component. There are also federal workers' compensations programs where benefits are provided.

According to the Chamber of Commerce of the United States there are six basic purposes to workers' compensation:

1. To provide sure, prompt, reasonable income and medical benefits to work accident victims and their dependents, regardless of fault.

2. To provide a single remedy and reduce court delays, costs, and work loads which arise as a result of personal injury litigation.

3. To relieve public and private charities of financial drains which result from uncompensated industrial accidents.

4. To eliminate payments of fees to lawyers and witnesses as well as time consuming trials and appeals.

5. To encourage maximum employer interest in safety and rehabilitation - through appropriate experience rating mechanisms.

6. To promote a frank study of the causes of accidents ( rather than concealment of fault) - reducing preventable accidents and human suffering.

The industrial revolution of the late 19th and early 20th centuries dramatically changed the nature of work in Western society, but an unfortunate early consequence was widespread injury and death in factories across Europe and North America. The system for dealing with such "wrongful" injuries and deaths was the tort or civil law system, where the person at fault was held responsible. For a number of reasons, this system worked very poorly.

The philosophy behind workers' compensation was that: (1) industrial activity benefits everyone in society, (2) some degree of misfortune will occur in any human activity, and (3) because everyone benefits from industrial activity ... society should bear the burden of any misfortunes. The workers' compensation solution was to treat industrial accidents as predictable costs of production, and pass their expense onto consumers -- regardless of worker or employer fault.

Prior to workers' compensation, employers in America defended themselves against workers' law suits with the common law defenses of: (1) assumption of risks, (2) contributory negligence, and (3) fellow servant. These defenses made employers virtually immune from law suits, and they may be briefly summarized as follows:

The wage paid to workers compensated them for any risks of injury or death inherent in their positions. They could see, for example, the elevated and narrow walkway (without any guardrail) that they would need to cross multiple times each day. If they fell off ... well ... it was part of the risk they accepted when they took the position.

This doctrine essentially held that if an injured or deceased worker had to any degree been negligent in their accident, the event would not have happened, and the employer was accordingly absolved of any liability. If, for example, the worker tried to walk faster across the dangerous walkway (because she was late to work and needed to catch up to keep her job), a fall was not the fault of the employer, even though the walkway was dangerous.

This doctrine held that if a coworker in any way contributed to the mishap it would not have happened, and the employer could not be held liable. If, for example, the rushing worker accidentally knocked someone else off the dangerous walkway, the employer had no liability.

In addition to the common law defenses, injured workers faced a number of technical problems in suing their employers: (1) they would almost certainly be fired, (2) they would receive a poor work reference, (3) any witness would likely be a coworker not wanting to testify against the employer, (4) a law suit, if successful, would bring no relief for a very long time, and (5) even if they won, the court award might be inadequate.

The first workers' compensation law was passed by Germany in 1884. Initially it only covered workers in manufacturing and mining, but by 1887 had been extended to cover government employees, agricultural and forestry workers, and seamen. Benefits for injured workers included medical expenses and income replacement of 66.66% of the last year's wage. In 1887 similar workers' compensation laws were passed in Great Britain and in the Austro-Hungarian Empire.

The first American workers' compensation law was passed by Maryland in 1902. Other early laws were passed by Massachusetts (1908), Montana (1909), and New York (1910). All of these laws were declared unconstitutional because they took the employer's property without due process of law, transferring powers to the state that were properly judicial powers. The 14th Amendment which addresses due process was the basis of the constitutional problem. The first effective law was the Federal Workmen's Compensation Act of 1908.

Because of constitutional problems with compulsory laws, states began passing elective laws. The first successful state law was passed by Wisconsin in 1911. Elective laws gave employers the choice of participating in workers' compensation or not, but if they chose not to participate they were denied the common law defenses that had protected them in the past. This strongly encouraged employers to participate because their ability to defend against an injured worker's suit was severely weakened. It was not until the Supreme court ruled in The New York Central Railroad vs. White that states could enforce workers' compensation laws under their police powers that constitutionality issues were finally settled. By 1921, 45 states and territories had passed workers' compensation legislation.

Medical Benefits: All medical expenses related to the injury for life.

Death Benefit: A cash payment to the survivors of the deceased.

Income Replacement (Cash) Benefits: These can be Temporary Total Disability (TTD), Permanent Total Disability (PTD), Temporary Partial Disability (TPD), or Permanent Partial Disability (PPD). The first two are normally 66.66% of the workers' wage subject to some maximum amount. TTD benefits normally offset part of the lost wages during a period of convalescence when work compensated at a lower level is performed, and in most states PPD benefits are in the form of scheduled injuries (i.e. workers receive a certain amount for lost body parts such as an arm, hand or eye).

Rehabilitation Benefits: Physical and vocational rehabilitation services.

Workers: Most workers' are covered by state laws. Typical exceptions are farm workers, domestic employees, professional athletes, self-employed persons, employees of very small employers, and casual or incidental workers.

Injuries: These are covered regardless of fault, unless they are self-inflicted or from intoxication.

Occupational Diseases: Conditions such as asbestosis, black lung, and radiation poisoning are fully covered.

Second Injuries: States have second injury funds in order to protect against subsequent injuries compounding disability resulting from an earlier injury. If, for example, a worker with one arm lost his other arm, the impact of the loss would be far greater because of the preexisting condition. Second injury funds cover additional expenses from the compound effect of injuries, and facilitate vocational rehabilitation.

The methods by which workers are insured are: (1) private insurance, (2) state funds, and (3) employer self-insurance.