History of Workers’ Compensation

This month I will concentrate on the history of workers’ compensation.  The reason behind this is not an academic approach but to evaluate the status quo of certain basic principles which were advocated when the legislation was introduced.  The idea is to judge whether the promises incorporated in the original legislation have been adhered to.

The Original Legislation and the Present

The legislation had its origin in Germany in 1880 followed by England in 1897.  In the USA the first state was Maryland in 1902.  New York’s act faced fierce opposition from the labour unions but was eventually passed.  The reason for the opposition cannot be discussed due to a lack of space.

Crux of the Legislation

Three basic principles underly the concept of workers’ compensation as we know it.  They are the following:

  1. No-fault compensation: Workplace injuries are compensated regardless of fault. The worker and employer waive the right to sue. There is no argument over responsibility or liability for an injury. Fault becomes irrelevant, and providing compensation becomes the focus;
  2. Collective liability: The total cost of the compensation system is shared by all employers. All employers contribute to a common fund. Financial liability becomes their collective responsibility;
  3. Security of payment: A fund is established to guarantee that compensation monies will be available. Injured workers are assured of prompt compensation and future benefits. The benefits include compensation as well as medical costs.  In the case of fatal accidents pensions are payable to dependants.

The above are the pillars on which the so-called trade-off was based; the statutory trade-off between the employers and employees.  It was introduced in South African legislation exactly in the same manner and is still unchanged since the nineteenth century. Our own legislation was originally based on the Canadian version and was in some cases exactly the same.  For a comprehensive Report on the history of workers’ compensation in South Africa, refer to the report produced on 27 March 2008: “This publication was produced for review by the United States Agency for International Development. It was prepared by Giampaolo Garzarelli, Lyndal Keeton-Stolk, and Volker Schoer, School of Economic and Business Sciences, University of the Witwatersrand, Johannesburg, Republic of South Africa.”

The background of workers compensation in South Africa is explained as follows in this report:

The Kruger government had considered passing an Employers’ Liability Act but before this could be finalised the Anglo-Boer War occurred (Katz 1994).  After the War, the first Workmen’s Compensation Act (WCA) was passed in 1914. Prior to the passing of the Act, employees injured at work had to institute a common law suit against the employer for negligence. Compensation would only be paid if fault could be laid directly with the employer. However, the difficulty of proving negligence, the common law defences, and the high cost of litigation rendered the worker’s common law right minimal, to such an extent that the British Parliament abandoned reform of the common law in favour of the German idea of workers’ compensation. While the 1914 WCA only recognised injuries, amendments to the Act in 1917 extended coverage to provide for specified industrial diseases. In its early form, the WCA was ineffective in providing adequate compensation because employers were not compelled to insure their workers against the risk of workplace injuries. Contemporaneously, employers that did not have insurance could face insolvency from a serious incident; while the employee affected could face poverty. As a result, by 1930, workers, industry and government recognised the need for compulsory insurance. In any event, risk aversion and market forces had resulted in the birth

If I peruse the different dictionaries “trade-off” means the following:

  • Collins English Dictionary: “an exchange esp. as compromise”
  • The Concise Oxford Dictionary: “such an exchange” “Exchange the act or an instance of giving one thing and receiving another in its place”

The impression that I get is that the underlying factor of the trade-off is that it should be equitable.  Was it so and is it now the case?

To be continued with the evaluation.

Till next month.

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Administration Fallacies

How often do you read or hear reports or press releases so delusional that it sounds as if it cannot be true? A popular one is to state that they will solve their problems through the upgrading/replacement of their information technology (IT) infrastructure? I have seen and heard this promise on numerous occasions from both state departments as well as large private sector organisations. Every time an organisation is under-performing the solution seems to be to introduce hardware and software. Not long after that has been implemented it is obvious that the so-called solution was a flop and the costly exercise is repeated, usually accompanied with a change of vendor and all that goes with it. No wonder that the administration costs of especially the state departments are going through the roof. The solution to the problem is constantly overlooked.

The idea that the IT infrastructure of especially the state is a magic wand that can fix all problems is a total misconception. A computer cannot (yet) think logically like some human beings are capable of. You have heard the cliché of “garbage in, garbage out” many times; it is still appropriate.
What then is the secret to the solving of the problem if an organisation is not functioning as is expected? The best people for the job should be appointed and then they should receive on-going training. The training should never stop as the administrative environment continuously changes – the administrators of the Act who are supposed to inform the clients especially so. I experience daily the ignorance of people who are supposed to assist the client or the employer in some cases. The idea that the IT can solve the problem is a fallacy. Although it’s a must as an administrative aid, it is nothing more and nothing less.

Another common occurrence is that legislation is changed to suit the level of the expertise of the civil servants administering the Act. If the officials cannot cope with existing legislation, the Act is altered. The result is the lowering of standards. Training, once again is the solution, not a legislative amendment.

When in trouble, another approach is to decentralise the problem. Create offices where the standard is even lower than the so-called head office. I have serious doubts that the IT can be “decentralised” if the main infrastructure in the head office is in a mess; I did not guess the latter fact, the CC told the parliament committee so. What is, however, disturbing is what such a decentralisation is going to cost although money does not seem to be a problem. Decentralisation in the true sense of the word means the total service scope not a “post office” receiving forms and passing them on to the head office for adjudication and rendering the total service. If the head office’s IT is in such a state as was explained to the portfolio committee, how do they intend to create a wide area network? Putting it bluntly, it is a pipe dream.

Now verbatim quotes of some of the press releases by the Department of Labour dated 27 March 2012 to illustrate my viewpoint.


“The compensation Fund has promised a bright future for its clients free from glitches of delayed claims that have characterised the institution for decades”

“Time has come for us to move away from a paper-based institution to one that is automated and therefore quickening claims capturing, assessment and adjudication:

He said the future would see an organisation staffed with a knowledge worker who is rounded and who understands the entire value chain of the Fund”

Try to work that one out for yourself.

“.. The future Fund would be decentralised in order to bring services closer to the people once agreement with trade unions have been concluded. He said all the processes and case management would be done in provinces rather than Pretoria”

I am not sure since when trade unions are involved in the management of the Compensation Fund. What I do know is that waiting for the blessings from trade unions to administer employers’ contributions is highly irregular and ultra vires the Act.

See what I mean. It sounds familiar and a repeat of numerous previous attempts. At the risk of sounding critical I point out what the future holds for employers. That is, once the pies (in the sky) have landed.

Till next month

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