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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