It is difficult to determine who first thought of compensation for work-related injuries. However, we do know that it was a nineteenth century German “Iron Chancellor” who championed workers’ accident insurance.

Before that, injured workers sued their employers in lengthy and costly lawsuits that sometimes resulted in no compensation at all.

The Ancient World

The concept of monetary compensation for a work-related injury is an ancient one. According to Gregory Guyton’s “Introduction to the History of Law,” laws that compensated injured workers existed as early as 2050 B.C. in the Mesopotamian kingdom of Sumer, which is now Iraq. The Sumerian laws outlined the value of specific body parts and the monetary compensation they deserved if lost or maimed on the job. For instance, the loss of a thumb was worth half as much as the loss of a finger.

The modern workers’ compensation system, however, owes its origin to Prussian chancellor Otto von Bismarck. His employer liability laws softened the common law principle of contributory negligence and established a basic model that would be used in other countries.

The earliest civilizations were not only cities but also religious centers, political kingdoms, and places of learning. Examine the cultural, religious, and technological achievements of these cradles of civilization, including the Caral-Supe and Olmec civilizations, and learn how archaeologists use art and architecture to reveal the past.

The Industrial Revolution

The Industrial Revolution created a need for workers’ compensation. Gregory Guyton explains that it was the first time that western societies began to recognize that injuries could be catastrophic for employees. Laws were established that compensated workers for the loss of specific body parts, based on their value. For instance, the loss of a thumb was worth half the value of a finger.

Bismarck, the Chancellor of Prussia, introduced the first modern workers’ compensation system in 1884. He was a master of Realpolitik, the school of political pragmatism. He outlawed Marxist and socialist parties, but he borrowed key features of their agenda to create a workers’ accident insurance program.

The United States had a great deal of disagreement over whether to adopt the German or British system in the late 19th century. In the end, the United States adopted the German model. Workers’ accident insurance laws shifted the balance of power from employers to employees. However, it was still quite difficult for injured workers to prevail. The laws required that the injured worker prove negligence to receive full benefits.

Germany

Modern workers’ compensation came into being in the improbable setting of nineteenth century Prussia under a stern, iron “Iron Chancellor” named Bismarck. He was not a socially conscious ruler, but rather a master of Realpolitik, the politics of political pragmatism. Bismarck needed to keep the loyalty of his workers so he could pursue his goal of unification and empire-building. To this end, he feigned concern for the working conditions of his people and instituted a system of workers’ compensation.

This program gave employees a guaranteed amount of salary replacement in exchange for the relinquishment of their right to sue their employers for tort-related damages. This is known as the compensation bargain.

This Prussian model served as a foundation for the later efforts of Britain and the United States. England’s first workers’ compensation law was passed in 1884, followed by the United States in 1908. These laws softened the common-law doctrine of employer liability and created a system that made the employer the insurer of workplace accidents, regardless of fault. This was a major shift from previous common law principles that made it difficult for injured workers to prevail through tort litigation.

England

England is part of the United Kingdom and is one of the world’s leading industrialized nations. The country has a rich history and its literature and popular culture is well known around the globe.

As the Industrial Revolution exploded, work environments were rife with bodily dangers. The only remedy available to injured workers was a lawsuit, or tort action, against their employer. Tort actions required injured employees to prove that their employers were negligent in causing the injury. But this remedy was problematic, because employers had three almost unbeatable common law defenses: the Fellow Servant Doctrine, assumption of risk, and contributory negligence.

In 1884, England created its own version of a mandatory workers’ compensation policy. This was similar to Germany’s, but did not fully rely on state administration. Rather, the British government relied on private disability insurance companies to administer the program. Ultimately, the 1884 law did eliminate the Fellow Servant Doctrine and the assumption of risk defenses, but it did not create a true no-fault system that would allow workers to receive immediate financial assistance for medical and lost wages without the need to prove an employer’s negligence.

The United States

In the United States, workers’ compensation laws were created at the state level during the late 19th and early 20th centuries. It is important to remember that these early policies still relied on the notion that certain body parts had specific values based upon their loss of function. For example, an eye or a finger lost would earn the injured worker payment worth about 50 weeks of wages. These systems also distinguished between “impairment” (the loss of function of a portion of the anatomy) and disability, which measures the ability to work in a particular occupation.

Otto von Bismarck—known as the Iron Chancellor—introduced the first modern system of workers’ accident insurance in 1881. His program, phased in by 1884, became a model for workers’ compensation programs throughout Europe and America.

Bismarck’s laws protected employers from civil lawsuits in exchange for prescribed monetary compensation after workplace injuries. Unfortunately, these early laws still required injured workers to prove employer negligence in a lengthy and expensive legal process that negatively impacted their daily lives. By the time of the Triangle Waist Company fire in 1911, that began to change.