Committee on Economic Security (CES)
Volume VI. Social Insurance
G. Workmen's Compensation
WORKMEN'S COMPENSATION
by
S. Kjaer
November 14, 1934
The desirability of one type of economic and social security-compensation
for injury to employees--was recognized more than 40 years ago in the
United States.
Radical changes in industry had gradually accentuated the inconsistency
and injustice of the common law of negligence, under which it was extremely
difficult for an employee to obtain redress for an injury. Attempts to
correct the defects by enactment of employers' liability statutes created
a very complicated situation and provided numerous rules based upon diversified
and conflicting reasoning. Employers' liability legislation afforded the
injured employee or the dependents a theoretical opportunity to collect
damages for the loss in earning power, but for every case in which comparable
damages were received, there were many in which nothing at all was recovered,
and a large percentage of all allowable compensation went to the lawyers.
The unsatisfactory experience under the liability laws and the desire
find a solution of the problem led in 1891 to a study by the United States
Bureau of Labor of the German accident insurance system, which became
effective in 1885. Investigations of European systems were also made by
individual States, and attempts were made as early as 1898 to establish
State laws covering workmen's compensation, but did not result in any
permanent act. Under the limitation of Federal authority, independent
State action was necessary, and compensation legislation was viewed with
suspicion in otherwise progressive States that were afraid of serious
competitive injury to their respective industries, through increased cost
on production.
The lead was taken by the Federal Government, which already had, in 1882,
provided some benefits to employees in the lifesaving service and, in
1900, for injured postal employees. The first permanent official recognition
of the workmen's compensation principle in the United States was in 1908,
when Congress enacted a Workmen's Compensation Law for civil employees
in certain hazardous employments in the Federal service.
This endorsement prompted further attempts for state legislation, and
in 1911 Workmen's Compensation Laws were enacted by ten States. Since
that time one State after another has fallen in line, so that now only
four States, all in the southeastern section of the country, are without
any compensation laws. Efforts have been made, and are being continued,
to establish acts in these four States.
The fundamental principle of workmen's compensation is to make suitable
provision for workers and their dependents in the event of injury arising
out of employment, with the expense charge as a legitimate factor in the
cost of production, payable in the first instance by the employer but
added by him to the selling price of his products, and ultimately paid
by the consumers.
This does not mean, as the term compensation might imply, that all of
the burden is borne by the employers or, in the final analysis, by the
consumers. The payments to the injured employees or their dependents are
limited to a specified percentage of the wage loss, in addition to other
limitations. Payments received are therefore not adequate compensation,
but a limited -indemnity which does not fully reimburse the worker for
the financial loss resulting from the injury. Consequently, the workers
and their dependents bear a certain share of the cost of industrial injuries.
The advantages of the compensation system is likewise shared by employers,
employees, and by society at large.
The employer is relieved of the uncertainty and expense of damage suits.
He is also relieved of the necessity of advancing the total loss in any
particular case, as he can secure his risk by relatively small annual
payments for compensation insurance and distribute direct payments through
extended periods.
The worker is assured of certain and speedy relief at a time when it is
most needed, and of receiving payments direct and in full, according to
a fixed schedule, eliminating delays and reduction of compensation by
deduction of legal expenses.
Society benefits through the reduction of the economic waste in the litigation
of claims; through the reduction of poverty and destitution of
injured workers and their dependents; and through the reduction of preventable
industrial accidents--one of the reasons for the requirement that the
initial cost shall be assumed by the industry.
Including the three acts under Federal administration and the acts of
the possessions of the United States, workmen's compensation legislation
is in effect in 51 jurisdictions in this country. Unfortunately, this
does not mean that these compensation acts are uniform, nor that model
compensation laws have been adopted in each of the 51 jurisdictions.
All of the laws are, however, designed to afford medical, surgical, and
hospital service immediately after injury and for a limited time thereafter;
and to provide limited financial aid, based upon previous wage income,
in order to maintain the worker and the dependents above want until recovery
from the injury; or, in the event of death, to provide limited financial
aid the dependents until a self-sustaining status is reached.
While workmen's compensation laws are a great improvement over the former
employers' liability system, they are still far from adequate. In the
first place many employees are excluded entirely from the benefits of
the acts. It is of no particular significance to an injured worker that
the compensation law in his State has a high scale of benefits if his
occupation does not come within the scope of the Act. Various features
are responsible for the narrow scope of many of the existing acts.
COMPULSORY OR ELECTIVE LAWS
Compensation laws may be either compulsory or elective. A compulsory
law requires every employer within the coverage of the law to accept the
Act and pay the compensation specified. An elective act is one in which
the employer has the option of accepting or rejecting the act. In case
he rejects, the injured employee may sue for damages, and the employer
is penalized by losing his right to his common law defenses.
If a compensation law is desirable, then it should apply to all employments.
Permitting the employer the option of accepting or rejecting the act defeats
in a large measure the intents and purposes of workmen's compensation
legislation.
Of the 51 compensation acts, 19 are compulsory for private employment,
and 32 are elective. Compulsory compensation is required for public employments
in 12 of the acts which permit optional compensation for private employments.
Many of the jurisdictions enacted elective laws to overcome constitutional
difficulties, but a substantial number have adopted the compulsory system,
which has been declared constitutional in several Supreme Court decisions.
In most of the jurisdictions having elective laws practically all of the
employers who are not otherwise exempted have accepted the act , but in
some jurisdictions relatively few have done so.
All compensation laws should be compulsory unless such a provision conflicts
with the State constitution.
COVERAGE OF EMPLOYMENTS
The two groups of workers who are most widely denied the benefits
of compensation are farm laborers and domestic servants. Only one act
covers all employments, including domestic servants. Farm labor is excluded
in all but two acts, though in a third act coverage is presumed--unless
either employer or employees reject the act. Four other acts cover threshing
of grain, or farm labor using machinery. Twelve States limit their acts
to so-called hazardous employments, thereby excluding mercantile establishments,
clerical occupations, and the professions. Interstate railroad and maritime
employments have so far been excluded because of Federal legislation and
constitutional limitations. The attention of the United States Congress
was recently directed to this omission through the introduction of a bill
providing complete and compulsory coverage of railroad employees engaged
in interstate commerce, a step in the direction of greater social security.
Other exclusions in a number of acts include casual labor and employments
not conducted for gain, such as in charitable and religious institutions.
A few exclude also employees receiving above a designated wage or salary.
The almost universal exclusion of farm labor can hardly be attributed
to a nonhazardous character. Two of the acts have definitely provided
for coverage of all farm labor, while four others have recognized the
necessity of protection where the use of machinery is involved. European
experience, together with available statistics in this country, indicates
that farming is a highly hazardous employment.
Domestic servants and clerical employees are excluded because of a low
accident hazard. The same reason accounts for the exclusion of employments
not classed as hazardous in the 12 acts where coverage is confined to
hazardous or extra-hazardous employments.
Numerical exemptions are also an important factor, excluding workers in
small plants from the benefits of the workmen's compensation principle.
Employers having less than a specified number of employed are exempt from
the operation of the law under 24 acts. The specified number is ordinarily
3 or 5, but ranges from 2 in one jurisdiction to 11 in three jurisdictions
and 16 in one jurisdiction. It is alleged that the hazard from fellow
workers is low in employments where only a few are employed. Most of the
acts permit the exempted employers to come under the law voluntarily,
as they do employments otherwise excluded. Voluntary acceptance is, however,
not taken advantage of to any extent.
The exclusion of employments or employers on the ground of having a low
hazard is indefensible from every point of view and especially from that
of the injured worker, whose misfortune is not at all alleviated by the
suggestion that the injury was quite unusual or unexpected. An injury
received in a mercantile establishment may be just as severe and entail
just as much distress as one received in a steel mill. The same condition
applies in regard to an injury received in a small plant with a few workers
or received in the midst of a number of other workers. Furthermore, if
an occupation is in fact only slightly hazardous, the additional financial
burden on society would likewise be slight, because of the very fact that
accidents are infrequent in these exempted employments.
All industries and employments, including public employees, should be
covered under the law, with the possible exception of agriculture and
domestic service unless the work involves the use of machinery.
COVERAGE OF INJURIES
Compensation laws are limited not only as to employments covered but
also as to injuries covered. As a rule injuries must have been received
in the course of employment and must have arisen out of employment, although
six acts do not contain the "arising out of" clause. In the
jurisdictions covered by these six acts every injury which occurs in the
course of employment, with certain exceptions, is presumably compensable.
Only two of the acts do not provide that the injury must be received in
the course of employment. In 39 of the acts it is stipulated that the
injuries must be accidental. Injuries due to willful conduct, intoxication,
or gross negligence are ordinarily not compensable. In 15 acts compensation
is denied for willful failure to use safety appliances or disobedience
of safety rules.
While 39 of the acts stipulate that the injuries, to be considered compensable,
must be accidental in nature, 10 of these also provide compensation for
occupational diseases, though not for all types. Eight of the other 13
acts also include coverage of occupational diseases, general in 12 but
limited in one of them.
Of the 18 acts which recognize that occupational disease should be considered
as an injury due to the nature of employment, only 10 cover all types
of these, either through direct stipulations in the law or through elimination
of the accident requirement. Seven of the acts limit the coverage to specific
diseases listed in the law. These lists vary greatly. The highest number
of diseases considered compensable is 27 listed in one act. Other acts
cover 23, 21, 15, and 10 types. One act recognizes only disease resulting
from lead, brass, or zinc, while one other limits the coverage to injuries
due to inhalation of gases or of silica dusts. The eighteenth act provides
optional coverage for employers with respect to occupational disease.
In all of the other acts, occupational diseases are excluded from the
scope of the law by express provisions in the act, by limiting coverage
to accidental injuries, or by adverse rulings of commissions or courts.
There is no valid reason for not applying compensation to all types of
occupational disease. The original idea of workman's compensation was
its application for disabilities occasioned by employment. At the time
the majority of these laws were enacted, disabilities were in practically
all cases the result of accidents. The great changes in industrial activities
developed numerous new hazards or accelerated some that previously were
insignificant, such as the multitude of chemical processes which are responsible
for an ever-increasing exposure of workers to chemical hazards. The additional
cost, advanced as an argument against the coverage of occupational disease,
had been shown to be only between 1 and 2 percent of the total compensation
cost, and that amount should certainly not prove sufficient excuse for
depriving the workers of this protection.
All injuries, including occupational diseases, arising out of unemployment
should be compensable, unless intentionally self-inflicted or due to the
intentional act of another party for personal reasons not connected with
the employment.
WAITING PERIOD
Another factor restricting the coverage of injuries is the withholding
of compensation payments for a fixed period after the occurrence of the
injury, the so-called waiting period. This does not apply to payments
for medical or hospital relief, which must be paid or arranged for at
once. Neither does it apply to fatal cases, in which compensation payments
start immediately unless a period of disability intervenes between the
day of the injury and the day of death.
Three-fourths of the acts provide a waiting period of 1 week, one act
of 10 days, two acts of 2 weeks, while one act requires only 5 days, six
acts only 3 days, and two acts have no waiting period. The majority of
acts, however, provide for compensation of the waiting period if the disability
continues for a specific term, usually 4 to 6 weeks.
The theory of the waiting period originated from a desire to prevent malingering
and to avoid the administrative expense involved in paying compensation
for every injury causing disability extending beyond the day of occurrence.
The importance of the waiting period may be indicated by the fact that
47 percent of all temporary disabilities terminate within one week, and
66 percent within 2 weeks. Figured in terms of days lost this means that
a 7-day waiting period eliminates 9.4 percent of the total time loss for
temporary disabilities, while a 14-day waiting period eliminates 20.7
percent.
The waiting period should in no case exceed 7 days and a uniform waiting
period of 3 days in all acts would be preferable.
COMPENSATION BENEFITS
All compensation laws provide that in case of injury or death the
worker or the dependents shall receive certain stated financial benefits.
The amount of these benefits varies greatly under the several acts, even
though they have all been determined according to two general factors--loss
of earning power, and social need.
The amount of compensation is based upon the earnings of the injured except
in two acts which provide a flat monthly pension irrespective of wages.
The periods during which the benefits are paid vary considerably, the
most common provision in case of death, being 6 years, although 11 acts
provide for compensation to widows until death or remarriage. One act
stipulates 4 years only, while the period reaches 10 years in another.
Another limitation provides that the total compensation shall not exceed
a certain fixed amount, ranging from $1,500 to $9,000, but principally
$4,000 to $6,500.
In 17 acts the compensation scale, based on the rates for temporary total
disability, is 66 2/3 percent of the worker's wages, in 6 acts 65 percent,
in 8 acts 60 percent, in 5 acts 55 percent, and in 12 acts 50 percent.
In one act the compensation scale is 70 percent of the worker's wages.
Two of the acts provide a flat monthly pension, which varies with conjugation
and number of children.
The principle that industry, and through industry society, shall bear
the burden of industrial injuries is quite generally accepted at present.
The theoretical application of this principle would mean that the injured
worker should receive 100 percent of the previous earnings in case of
injury. There can hardly be any question of the fact that the average
worker needs the full amount of previous earnings to maintain a family,
and the fact that the injury has deprived the worker of the earnings would
lead to the conclusion that the entire amount should be paid.
It may be desirable, both for the prevention of possible malingering and
for bringing home to the worker the individual responsibility for the
injury, to let the worker assume a portion of the financial burden. This
portion should at the most, however, not be more than one third of the
compensation cost.
The amount of compensation should equal in case of disability at least
66 2/3 percent of the wages of the injured worker, to be paid during period
of incapacity. In case of death the percentage should vary with the conjugal
condition and number of children, ranging from 35 to 40 percent for a
lone widow until death or remarriage, with 15 percent additional for one
child under 18, and 10 percent additional for each additional child, subject
to a maximum of 66 2/3 percent of all.
WEEKLY MAXIMUM AND MINIMUM PAYMENTS -
In addition to the percentage deductions from the actual wages of the
worker, all acts except two provide maximum and minimum compensation payments,
weekly or monthly. The maximum weekly payments for temporary total disabilities
range from $9 in one act to $30 in one act.
Two acts prescribe a maximum of $14, twelve of $15, five of $16, one of
$16.50, six of $18, one of $18.75, one of $19.50, eight of $20, two of
$21, and four of $25. Maximum monthly payments provided in four of the
acts are $72 in one, $90 in one, $97 in one, and $116.66 in one. The remaining
act provides fixed monthly amounts, according to dependency: $35, if single;
$40, if wife or invalid husband; $12.50 additional for one child; $7.50
for second child; and $5 for each additional child.
These maximum payments, beyond which the compensation cannot go, but only
limit the amounts, but virtually nullify the percentages. It is absurd
to speak of payments of 66 2/3 percent of the wages when the same law
limits the weekly payments to $14, $16, $18, or $20. It was evidently
the intent of State legislatures when they fixed the percentage system
of compensation to divide the cost between the worker and the industry
on the basis named. The introduction of the weekly maximums, together
with other limitations, compels the injured workers to bear at least two
thirds of the cost.
The weekly maximums are unjust to the workers and should be omitted from
the acts, or at least raised to a sufficient level to enable the worker
to maintain self and family while incapacitated.
COMPENSATION PERIODS -
In most acts it is conceded that permanent total disability constitutes
a greater economic loss than a fatal injury. Payments to widows are in
most acts limited to a term of 5 years, although 11 acts provide benefits
until death or remarriage. The limitation on maximum amount payable in
any one case ranges ordinarily from $4,000 to $6,500. In permanent total
disability cases, however, 21 acts provide that compensation payments
shall continue during the full period of the life of the injured, although
four of these acts also provide maximum amounts, $7,500 in two, $10,000
in one, and $15,000 in one. In 27 other acts the period for which compensation
is paid ranges from 208 to 1,000 weeks. Maximum amounts are also prescribed
in 19 of the acts which do not provide for life payments. These range
from $1,500 to $9,000.
Two methods have been adopted for compensation payments in permanent partial
disability cases, and usually both methods are provided for in the act.
One method is payment based on the percentage of wage loss occasioned
by the disability, with payments continued during incapacity but subject
to maximum limits. The other method is payments for fixed periods according
to a schedule for specified injuries. Two of the acts do not include schedules.
The amounts in these schedules vary considerably among the various acts,
although the usual provision is from 200 to 250 weeks for the loss of
an arm, 175 weeks the loss of a hand, 200 weeks for the loss of a leg,
125 to 150 weeks for loss of a foot, and 100 to 125 weeks for the loss
of an eye, with proportionate amounts for minor disabilities. Perhaps
the least defensible provision in compensation legislation is the limiting
of the periods in which compensation is payable if need still exists at
the expiration of these periods. The termination of payments to a widow
at the expiration of 300 weeks or less cannot be justified from either
a social or an economic standpoint. The older the widow the greater her
dependence and need for compensation, unless she has remarried. The same
principle holds true with respect to total and permanent disabilities.
The longer the worker is disabled the greater will be the need for compensation,
and to terminate the compensation benefits while total disability exists
violates one of the fundamental principles of Workmen's Compensation Laws.
Specific periods provided for loss of or loss of use of members are supposed
to roughly represent the loss of earning capacity, but are entirely inadequate
for the major disabilities and actually bear little relationship to the
loss of earning capacity resulting from such disabilities.
In fatal injury cases compensation should be paid until the death or remarriage
of the widow. It seems advisable to award a lump sum, equal to two year's
compensation, in the case of remarriage. Children should receive compensation
until 18 years of age, or longer if they are physically or mentally disabled.
In permanent total disability cases compensation should be paid during
life. In permanent partial disability cases compensation should be paid
for temporary total disability during the healing period, and additional
compensation paid for the permanent partial disability on a justifiable
basis, such as according to the schedule adopted by the International
Association of Industrial Accident Boards and Commissions.
In temporary total disability cases compensation should be paid during
disability.
MEDICAL SERVICE -
All of the compensation acts provide medical service in case of injury.
The usual provision is that the employer shall furnish reasonable or necessary
medical, surgical, and hospital service. In 14 of the acts neither period
of service or cost of service is limited. Eight other acts do not limit
the period, and 12 other acts place no limitation except reasonableness
upon the amount of medical service which the employer must furnish. In
19 of the acts the employer's liability is limited as to length of time,
ranging from 10 days to 90 days, but with additional service at the discretion
of the administration in 12 acts. In 25 of the acts the maximum amount
is limited, ranging from $100 to $800, but with additional cost at the
discretion of the administration in 11 of the acts.
Four of the acts permit collections from employees for medical funds,
$2.50 per month in one, one half cost but not to exceed $1 per month in
two, and one half cost in one, while several acts prohibit contributions
by employees.
There seems to be no legitimate reason why unlimited medical, surgical,
and hospital treatment should not be provided under every workmen's compensation
act. Adequate medical treatment is absolutely essential for the rehabilitation
and restoration of the earning capacity of injured workers. The cost of
this service should not be transferred to the worker, who already carries
considerable of the financial burden. It should, like the compensation
payments, be absorbed by the industry as cost of production.
The injured worker should be furnished, free of charge, such medical,
and hospital treatment including nursing, medicines, medical, and appliances,
crutches, and apparatus, including artificial members, as may reasonably
be required to cure and relieve from the effects of the injury. Employers
should not be permitted to accept contributions from employees to defray
medical, surgical, or hospital service for injuries arising out of the
injury in the course of employment.
SECOND INJURIES.
It is manifestly unjust that in case of the loss of a second eye, a worker
should receive compensation for loss of one eye only. On the other hand,
if he should be awarded permanent total disability it would result in
a discrimination against the employment of one-eyed workers. The same
problem presents itself in the case of any worker who has lost a leg,
or an arm, or any other member of the body. He is industrially handicapped
and the possibility of having to pay an award for total disability would
make most employers refuse to employ him. The obvious and simple solution
of this dilemma is the establishment of a special fund, to relieve the
employer of the additional liability, so that in case of a second injury
he will be charged with the cost of the single injury only. The injured
worker will, however, receive compensation for the disability caused by
the combined injuries.
Such funds have been provided under 14 of the acts, and the establishment
of a similar fund in each jurisdiction has been urged by the International
Association of Industrial Accident Boards and Commissions.
INCREASED COMPENSATION FOR ILLEGALLY EMPLOYED MINORS.
In an effort to advise the social conditions of workers many of the States
have adopted child-labor laws prohibiting employment at dangerous work
to persons under certain ages, or requiring labor permits for minors.
Such age limitations have also been partly extended to other States where
no provisions existed, as a result of the labor provisions in the N.R.A.
codes of fair competition. Most of the codes which have been approved
prohibit, so far as the individual industry is concerned, any employment
of children less than 16 years of age and also the employment in hazardous
occupations of children less than 18 years of age.
Fourteen of the compensation acts provide that the employer must pay increased
compensation when an illegally employed minor is injured in his service.
Other acts cover illegally employed minors without any special provisions
regarding indemnity for injuries, and in some acts no coverage is extended.
Double compensation payments are provided in eight of the 14 acts. One
act stipulates double compensation to injured minors employed without
a labor permit in otherwise lawful employment, and treble compensation
to minors employed in prohibited employment. Three acts provide for 50
percent additional compensation, and the remaining act for 25 percent
additional compensation but extended to 35 percent under certain conditions.
The welfare of the youth of the Nation is an important social factor,
and the application of a penalty for violating the laws which protect
the lives and the limbs of the future workers seems fully justifiable.
Minors should not be employed on unguarded or dangerous machines, nor
in any other hazardous occupations. Provisions should be made in all acts
for double compensation--at least, in all illegal employment of minors.
ADMINISTRATION AND PROCEDURE.
Most of the workmen's compensation acts are particularly framed to avoid
legal entanglements and the technicalities of law pleading. In the great
majority of acts it was determined at the outset that administration by
the courts was unsuited to the intent and purposes of the act, and provisions
were made for special administrative bodies, making use of existing labor
agencies as far as possible or creating new ones to administer the compensation
laws. Some of the jurisdictions, however, did not establish administrative
systems, and consequently two general types of administration were developed--the
commission or board type, of which there at present are 44, and the self-administrative
or court type, which was originally adopted by 15 jurisdictions but proved
so unsatisfactory in eight of them that the commission type was substituted
later, so that court administration now exists in only seven jurisdictions.
In the commission type, a special administrative organization, usually
a commission or board of three members, is created to enforce the law.
It is granted extensive powers, and ordinarily has three distinct functions,
administrative, legislative, and judicial. The administrative function
is mainly concerned with activities relating to the keeping of records,
regulation of employers coming under the act, and supervision of insurance
provisions, involving investigative and clerical work. The legislative
function consists in formulating rules of practice and procedure for carrying
out the provisions of the act, while the judicial function is exercised
in adjusting and settling compensation claims. The commission usually
also administers the State compensation insurance fund, if such a fund
is created, and in some jurisdictions has the additional function of accident
prevention, while in other jurisdictions it administers part or all labor
laws.
In the court type the amount of compensation and other questions at issue
are settled directly by the parties concerned, the employer or the insurance
carrier and the injured worker or the dependents. In case of dispute it
may be submitted to arbitration. If this fails, the controversy is taken
to the courts for adjudication. The functions of the courts are consequently
confined practically to the settlement of disputed claims, and where this
system exists a limited supervision over some of the other provisions
of the act is exercised by governmental labor agencies or other local
authorities.
The need of an authoritative agency to administer the compensation law
and direct the procedure is sufficiently demonstrated in those jurisdictions
which do not possess them. A large proportion of American workmen, whether
native or foreign, are generally unfamiliar with their rights under the
law and do not know what action to take in case of injury. The fear of
discharge also frequently acts as an effective deterrent in demanding
compensation. An administrative commission is practically necessary to
insure correct procedure for the injured worker, and the prompt adjudication
of controversies without unduly technical entanglements. Compensation
acts, in common with most other laws, are not automatically enforceable
but require administrative bodies to enforce them.
The administration of the compensation act should be vested in a board
or commission, preferably of not more than three members. The board should
be granted sufficient authority to determine all detail procedure, to
employ necessary assistants, and to administer the act efficiently.
The board should be the sole judge of all questions of fact, with recourse
to the court only on questions on law. The expense of administration should
be paid by the industry or the insurance carriers.
INSURANCE.
Under a compensation law the employer is liable for the compensation provided.
Many employers, however, in case of serious or fatal accidents, would
probably not be able to meet their compensation obligations. All but three
of the acts therefore require all employers to secure their compensation
payments by insuring their risks in an authorized insurance carrier, or
in a State insurance fund where such a fund is provided, or, in the case
of self-insurers, to deposit bonds or other collateral security and to
furnish a financial statement showing assets and liabilities. Forty acts
permit insurance in private carriers. Forty-one acts permit self-insurance.
Eleven acts provide for a competitive State insurance fund in which the
fund operates in competition with other forms of insurance. Seven acts
provide for an exclusive State fund, which becomes the sole insurance
carrier, with no private insurance carrier permitted to operate in the
jurisdiction.
There has been a great deal of discussion as to the relative merits of
the different types of insurance. An investigation made about 10 years
ago showed that the State funds could operate more economically than either
the mutual or stock companies. Insurance premium rates from that time
to date indicate that the same condition prevails at present. One competitive
State fund, which is operated on practically the same plan as private
mutual carriers, accepts business at 25 percent less than the insurance
premium rates charged by stock companies in the same jurisdiction.
The refusal of private insurance companies to underwrite either all of
certain industries or at least special risks classed as undesirable presents
a problem, which seemingly can only be solved by the establishment of
the so-called State funds, a term that is very misleading. It permits
the assumption that the State assumes the financial obligation involved
in the enterprise, when it is really a mutual fund, supervised by State
officials, and the expenses of the fund are paid by the insured.
Self-insurance is usually limited to the larger employers. Sixteen of
the acts require that self-insurers must in all cases either furnish proof
of solvency or deposit security, while the other acts require this only
if their solvency is considered questionable. The larger employers ordinarily
prefer self-insurance, especially where insurance premiums are based on
schedule rating, which increases the cost for an employer with a low accident
record. With insurance furnished at a cost basis this objection would,
of course, be eliminated.
Every employer should be required to furnish adequate security to guarantee
his compensation obligations under the law. Insurance should be compulsory.
The tendency to evade insurance requirements should be met with heavy
penalties for failure to insure. The State should provide facilities for
insurance for every employer subject to the compensation act, by the establishment
of a State insurance fund, either exclusive or competitive.
Where private insurance is permitted, the supervision of solvency of the
carriers and the responsibility for the reasonableness and adequacy of
the insurance premium rates should be vested in the board or commission
administering the act.
ACCIDENT PREVENTION
One of the important effects of workmen's compensation laws has been the
stimulus it has given to accident prevention work. Adding the cost of
injuries to the cost of production made the reduction of accidents an
economic as well as a social problem. It was realized that it was cheaper
to prevent accidents than to pay for them.
Compensation acts generally provide for the reporting of injuries, a primary
factor in accident prevention. Reports explain where, when, how and why
accidents occur, information which is necessary to avoid similar mishaps.
Many of the acts also provide for the establishment of safety regulations
and inspection of industrial work. Some of the commissions which administer
compensation laws are performing excellent safety work.
These duties, however, are in some jurisdictions assigned to other officials,
and as a result the commissions are not always interested in accident
prevention. They regard themselves as judicial rather than administrative
officers. Since the problem of accident prevention is intimately connected
with the whole theory and system of compensation it would seem that this
important work should logically be undertaken by the same agency that
administers the compensation provisions.
Insufficient appropriations are often responsible for the neglect of the
safety movement. It costs money to save money, and energetic accident
prevention work will soon pay large dividends, both social and economic.
Adequate funds should be provided to permit inspection of workplaces,
instruction of both employers and workers in safe methods, and other assistance
to eliminate unnecessary and preventable accidents.
LEGISLATION:
The fact that some changes are desirable in existing compensation is evident
from the amount of legislation proposed yearly in the various jurisdictions.
During 1933 more than 400 bills relating to workmen's compensation were
introduced in 43 State legislatures. Some of the measures proposed radical
changes in present systems but, as usual, the majority of them failed
to pass. A total of 83 were enacted. Special commissions were active in
different States, by legislative or other governmental direction, investigating
the compensation acts or certain phases of these.
RECOMMENDATIONS
1. Compensation: Compulsory
2. Coverage: All industries and all employees, including State
and municipal, but exempting possibly agriculture and domestic service.
No exemptions of small employers or "nonhazardous" industries.
The right of the employee to waive compensation prohibited. Extra territorial
workers to be included. In this connection reciprocity and cooperation
between States is very desirable.
3. Injuries: Define injuries to include occupational diseases.
"Blanket" coverage of occupational diseases rather than "schedule"
coverage.
4. Waiting period: Not more than 7 days nor less than 3.
5- Percentage: For nonfatal cases, not less than 66-2/3 percent
of the injured employee's wage. In case of death, 35 percent for widow,
without children, plus additional amount for each child, the total not
to exceed the percentage for permanent total disability.
6. Weekly maximum and minimum compensation: Maximum should recognize
the rights of the higher-paid workers to a standard of living above the
subsistence level, and minimum should be not less than the subsistence
level.
7- Compensation period: Fatal cases: benefits until death of widow
or remarriage, in which case 2 years' compensation at time of remarriage;
children to 18 years, and thereafter if physically or mentally incapacitated.
Permanent total disability: During life
Temporary total disability: During disability
Permanent partial disability: Compensation should be calculated on the
basic percentage of permanent total disability and should be payable in
addition to compensation for healing. period (that is, temporary disability).
For administrative simplicity, there should be a schedule of permanent
partial disability benefits based upon the foregoing principle.
8. Medical service: Unlimited medical and hospital service without
cost to injured employee. Choice of physician by employee from panel.
Impartiality of testimony re: extent of disability.
9. Second injuries (for instance, loss of second eye); second-injury
fund; rehabilitation fund: Employer charged as though for first injury
and balance to be paid out of special-injury fund, both amounts not to
exceed permanent total disability. Fund secured from death benefit where
there are no dependents, and from payments in
first major injury cases.
10. Increased compensation: Double compensation for illegally employed
minors injured during course of employment.
11. Administration procedure: Commission, not court. Informal,
"administrative," with adequate provision in law for the commission
to have the power to check "ambulance chasing," regulate attorney's,
and doctor's fees, etc. Appeals to be permitted to appellate courts only
on questions of law.
12. Insurance: Two methods possible (first method recommended):
(a) state insurance fund, exclusive or competitive
(b) Private insurance carriers
Severe penalties on employers not complying with insurance requirements
desirable.
13. Accident prevention: Adequate provision. Reporting of all accidents
compulsory
14. Uniformity: Steps to be taken to insure uniformity of workmen's
compensation laws in all jurisdictions.
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