Division of Workers' Compensation
History
Workers' Compensation, A Brief History
by Lloyd Harger, Division of Workers' Compensation
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, judgements 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, therefor 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.
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