Workers’ Compensation: Wisconsin Pioneers the Nation’s First Constitutional
Workers’ Compensation Law
Gregory Krohm1
A century ago, workers’ compensation was a radical new idea in the United States. For
the first time, a state law guaranteed a specific amount of compensation for work injuries.
The compensation barely offset the lost wages (about 65% of lost wages with caps on
long term disability), but it was a sure thing
compared to the vagaries of public relief or
going to court to sue the employer for
compensation. Why was this so
revolutionary? Why did both employers and
organized labor accept this law as “the Great
Compromise?” To understand the answers
and to better appreciate the history of this era
and the social progress it produced, you need
to go back to conditions in industrial
America at the turn of the 20th century.
The early 1900s was a time of unprecedented
economic progress, known as the Gilded
Age. Many Americans were reveling in new
inventions like electrical appliances and
amassing wealth from booming industry. At
the same time, other Americans sought more
control over unbridled business interests in
order to protect public health and safety.
Among the urban working class, there was a
feeling of being ground down and exploited
by uncaring employers. The government
seemed more bent on protecting capitalists
than common people, as shown by police
and state militias suppressing strikers. It was probably the high water mark in US history
for class hostility and support for a socialist economic system.
Today, compensating workers for job injuries seems like an obvious right, if not common
decency, but in the early 1900s, society had a different perspective of justice and the role
of government. The new workers’ compensation law was hammered out by visionaries
who tried to bring compromise among deeply divided economic factions. There was a
1
Executive Director, IAIABC, Madison, WI. Email: gkrohm@iaiabc.org
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poisoned atmosphere separating organized labor and business management that makes
today’s ideological and partisan battles look tame.
To appreciate the significance of workers’ compensation, one must understand it as the
first form of social insurance in the United States. The idea that society had an obligation
to create a safety net for unfortunate citizens facing severe loss of earnings was, to put it
in the words of some contemporaries, “a dangerous and socially destabilizing concept.”
In addition, workers' compensation was the first form of “no fault” insurance. This was a
significant innovation designed to reduce the dead weight loss to society from court
battles over fault and damage compensation. This challenge to the tort system of justice
was “nothing less than revolutionary.”2
The birth of social insurance in Wisconsin came out of the state’s highly influential
Progressive Movement. Progressive in visionaries were able to strike a finely balanced
compromise between labor and management that brought a new measure of security and
industrial peace. The strong Germanic heritage in Wisconsin, discussed below, was
another factor favoring the enactment of workers’ compensation law. Following is the
story of how social and economic forces, coupled with enlightened leadership, gave birth
to a law for workers’ compensation in Wisconsin. History has shown that this law was as
durable and practical as it was path breaking.
Before Workers’ Compensation
At the turn of the 20th century, work was brutally difficult. Injury and disability were far
more threatening to workers than now. Many people knew families living in destitution
because the “breadwinner” was killed or handicapped by injury. Following is a 1911
commentary by John Mitchell on the havoc this created every day for Americans:
It is safe to say that the greatest calamity that can befall the family of the wageearner is to have the father and bread-winner carried lifeless into his home, and
the shock of this calamity comes with added force when the death is due to an
industrial accident. And yet we are informed on the very best of authority that
this tragedy is enacted in the United States more than 100 times each day, more
than 35,000 times each year.3
The authority for the above death toll is uncertain because very few systematic attempts
were made to record accidents. Two rare tallies of accidents dealt with mining and
railroad work, which were large industries with shocking death rates. Almost 1,500
workers were killed in coal mine accidents in 1900, compared with 47 in 2006. For
railroads, there were 2,550 railroad workers killed in 1900, compared with 16 in 2008.
2
Joseph Ranney, Law and the Progressive Era, Part 3:
Reforming the Workplace, Wisconsin Lawyer, Wisconsin Bar Association, found April 2011 at:
http://www.wisbar.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&
CONTENTID=35854
3
Quoted in: Walter Smith, Present Status of Workmen’s Compensation Law, Annuals of the American
Academy of Political and Social Science, 1911, p 128.
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Looking back, the National Safety Council estimated that in 1912, 18,000-21,000
workers died from work-related injuries. The US Bureau of Labor Statistics data shows
that in 1913 there were 23,000 industrial deaths among a workforce of 38 million,
equivalent to a rate of 61 deaths per 100,000 workers4 compared to a rate of 3.6 deaths
per 100,000 workers in 2008. The lesson from these various estimates is that as a
society, occupational accidents and deaths were not counted because there was no
meaningful attempt by the federal government to regulate safety.
By 1890, logging was the leading industry in Wisconsin. Historical documents describe
10 hour work days with no safety equipment coupled with very hard physical labor and
constant threat of being struck by trees or hurt by equipment. Injury and death rates were
astonishing by today’s standards. Death and dismemberment were also very common in
railroad work, construction, and heavy manufacturing.
Why so many injuries? It is hard for us today to grasp, but the typical employer in 1900
felt little obligation – moral or legal – to investing company resources to modify jobs or
equipment to reduce injuries. It was accepted by society that people got hurt when they
worked. It was “a fact of life.” No one systematically collected work injury and death
statistics prior to the advent of workers’ compensation. This is a testament to how little
people thought this was an issue that could be managed by employers, or regulated by
government.
Work injury was just one of many deprivations suffered by the average laborer in 1900.
In Milwaukee, most workers routinely put in 10 to 12 hours a day, six days a week, for
only a dollar or two a day. The work environment often was crowded and unsanitary.
Before workers’ compensation, a worker with a disabling injury faced a two-part crisis:
getting medical treatment and maintaining the household. Both required cash. Making
matters worse was the fact that the vast majority of households had only one wage earner.
At the turn of the century, women made up less than 20% of the formal workforce.
Coming up with the cash to pay for housing and food required a patchwork of solutions,
among them: family, charity and selling property. Before the advent of social insurance,
private charitable organizations provided the most visible social response to
impoverished households.
As amazing as it may seem to us today, our great grandfathers had no clear sense of an
entitlement for help from the employer after a work-related injury. The disabled worker
had to make a hard decision: Was it worth the cost and months or years of delay to sue
the employer in whose service the injury occurred? This was a tricky call. Suing would
probably discourage reemployment with that boss and maybe others in the neighborhood.
Just as troubling was the low chance of winning the lawsuit and being made whole.
Workers faced a huge burden proving to a court that their employer alone caused their
4
Center for Disease Control, found April 2010 at:
http://www.cdc.gov/mmwR/preview/mmwrhtml/mm4822a1.htm
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injury and was legally responsible for paying for damages. Estimates vary on the
chances of a worker getting a court award or an out of court settlement. A reasonably
reliable assessment by Price Fishback, a leading historian is summed up as follows:
Various studies done by state employer liability commissions suggest that a
substantial number of workers received no compensation for their accidents,
which might have been expected if the employer's negligence was not a cause of
the accident. In samples of fatal accidents, about half the families of fatal
accident victims received some payments for the loss of their loved ones. For
those who received payments, the average payment was around one year's
income. There were a few cases where the accident victims and their families
received substantial payments, but there were far more cases where no payment
was made.
Another sobering difference between the early 1900s and today was the much higher
proportion of the workforce with a disability. Just before 1900, about 35% of workers
ages 45-64 were estimated to have had a disability. This is 2-3 times higher than the
same age groupings today, even though our definition of disability is more liberal than a
hundred years ago.
The sorry plight of disabled workers and court battles with employees was unsatisfactory
- if not painful- to many business interests. Employers did not relish defending
themselves in court against injured employees. Indeed, some employers clashed with
their general liability insurers for their vigorous defense against worker claims for
compensation. A.G. Ranney with International Harvester, expressed the hostility of his
peers toward “stock insurers” for using “every subterfuge to withhold the payment of just
compensation” to injured workers.
Injured workers faced years of delay and legal costs that consumed a third of any
compensation settlement or award. Too often injured workers and their dependents
became the objects of long term charity and public relief.
Apart from humanitarian concerns, employers had two other reasons to worry about
injury compensation: 1) the court system was less employer friendly, and 2) the growth
and militancy of organized labor. Both are discussed below.
From the start of the Industrial Revolution in the late 18th century, employers enjoyed
very strong defenses against lawsuits by their injured workers. These defenses – called
by one critic the “three wicked sisters” – were: 1) the assumption of higher job risk (in
exchange for higher wages) by the employee, 2) the employees own negligence in
causing the accidental injury, and 3) the negligence of fellow employees in causing the
accident and injury. However, in Wisconsin and other states, legislatures and courts were
taking a dim view of these defenses. Railroad worker secured legislation to liberalize the
standard for compensation even when the worker’s own negligence could be proven. The
employer defense based on fellow employee negligence was weakened by legislation in
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1889, well before serious consideration of workers’ compensation; Wisconsin courts
were taking a narrow view of how far these defenses could be used to bar worker
compensation. 5
Labor unions were becoming stronger. Union-led labor actions were disruptive to
business and sometimes erupted into violence. The stronghold of militant unionism was
in Milwaukee. In 1886, the Milwaukee Eight-Hour League demonstrated for an eight
hour work day. That demonstration became the bloodiest labor rights clash in
Wisconsin history:
A general strike was called in early May to force companies to adopt the new
eight hour work day. Using persuasion and intimidation, the strikers soon shut
down every major employer in the city, with a lone exception: the North Chicago
Rolling Mills, a massive steel plant in suburban Bay View.
On May 4, 1886, a group of laborers, many of them Polish immigrants, resolved
to bring the mill’s leaders to heel. Nearly 700 of them gathered at St. Stanislaus
Church, on the corner of 5th and Mitchell Sts., for a brisk morning walk to Bay
View. When a conference with mill executives there proved fruitless, the laborers
served notice that they would return.
“Uncle Jerry” Rusk (Wisconsin Governor Jeremiah Rusk) called out the militia in
the meantime, and the troops spent an uneasy night inside the plant gates. On the
morning of May 5, they faced a phalanx of marching workers that had swelled to
at least 1,500.
As the crowd surged down Bay St. toward the mill, the militia commander
ordered them to disperse. At a distance of 200 yards, it is doubtful that the
marchers heard him above their own noise. When they continued to advance, the
commander ordered his troops to open fire. At least seven people fell dead or
dying, including a 12-year-old schoolboy and a retired mill worker who was
watching the commotion from his backyard. The rest of the crowd beat a hasty
retreat to the city.
Reflecting the social fissures of that era, accounts of the incident and reactions varied
wildly. Many citizens seemed to lament the death(s), but also had respect for the right of
the militia to maintain order. Of course, those in the labor movement saw the shootings
as evidence that industrial property was valued more highly than industrial workers. This
incident was vivid proof of the visceral hostility between employers and industrial
workers.
5
Asher, notes that in Ward & Butterfield v. Milwaukee & St. Paul R. Co. (1871), the
Wisconsin Supreme Court softened the contributory negligence rule by holding that it did
not extend to cases of "slight negligence.” For a full discussion see Asher,op cit, p 126.
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The plight of industrial workers and the lack of cooperation on improvements in working
conditions were driving many in the labor movement to embrace socialism as an
economic system rather than capitalism.
Clashes like Bay View fueled the socialist movement in Milwaukee. The Socialist Party
in Milwaukee, formed by Victor Berger in 1897, succeeded in having one of its party
elected Mayor of Milwaukee in 1910 and again in 1917. Berger was elected to Congress
twice as the only member of the Socialist Party.6
Milwaukee Socialists rejected the Progressive program of incremental reform of business
through regulation. They sought the take over of capitalist own businesses with
government-owned firms that would protect workers and consumers. Clearly, this must
have alarmed business owners and conservatives.
To many employers this attraction to socialism by the labor movement was a very
dangerous, anti-establishment trend. The rise of the Socialist Party in the US had an eerie
similarity to the conditions that gave rise to the first workers' compensation system in the
world. Germany in the late 1800s had a considerable following for fellow German Karl
Marx, the intellectual father of communism. The German Social Democratic party was
also gaining seats in the national parliament.
Chancellor Otto von Bismarck was busily unifying Germany and had little truck with the
anti-capitalistic program of the socialists. True to his reputation as the “Iron Chancellor”
he banned the Social Democrats in 1875, but was astute enough to co-opt the Socialist
agenda of rights and protections for the working class. He bowed to the need for
compromise on worker rights and engineered a major set of laws that created health
insurance, retirement benefits, disability benefits, and workers’ compensation. This
broad swath of reforms was enacted with blitzkrieg speed, between 1884 and 1889.
Wisconsin, it seems, was paralleling the German experience. More will be said about the
Germanic roots of Wisconsin workers’ compensation system.
The Big New Idea
On September 1, 1911 the nation’s first constitutionally valid workers’ compensation law
became fully effective in Wisconsin. The bill passed with only fourteen dissenting votes
in the Assembly and four in the Senate. Clearly, a political consensus had been skillfully
hammered out.
6
Evidence of the visceral animosity toward the Socialists by established parties came when the US House
of Representatives refused to seat the newly elected Berger in 1918 for violating the federal Espionage Act.
For a full discussion of Socialists in Wisconsin during this era see: “Milwaukee Sewer Socialists” State
Historical Society, found at: http://www.wisconsinhistory.org/turningpoints/tp-043/?action=more_essay
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Workers’ compensation was a decisive break with the past. As stated earlier, it was the
first form of no-fault insurance: Pre-defined medical and wage loss benefits were to be
paid to an injured worker regardless of who caused the work injury.
The other part of the bargain was that workers could not sue their employers, even for
clear negligence causing their injury. Protecting negligent employers was a bitter pill for
labor advocates. But, in a companion bill to the enactment of workers’ compensation, the
legislature created a powerful new state agency to regulate safety.
How did these breakthroughs in compensating for occupational injury and promoting
workplace safety come about? What were the intellectual and legal roots of the new
legislation? How did the political will come about to change the rights and obligations of
so many workers and employers?
The fresh new legislation that framed this new social institution needed bright minds and
skillful legislative craftsmen. One of the framers was an economist at the University of
Wisconsin, J. R. Commons. Commons joined the UW faculty in the Department of
Economics in 1902, and served there until his retirement in 1932. He brought distinction
to the university as an author and teacher of a large number of prominent graduates of his
department, including Edwin Witte, the “Father of Social Security” and Arthur Altmeyer,
statistician and secretary for the Wisconsin Industrial Commission and first
Commissioner of US Social Security
Commons had an interesting blend of traditional, innovative, and plain odd beliefs that
earned him the label “conservative progressive.” He cut against the grain of the
economics profession by rejecting reliance on studying and promoting free market
solutions to economic development and as the organizing principle for the economy.
Instead, his thought focused on what is called institutional economics, the study of
collective action to construct social institutions that constrained markets and order
economic systems and economic development of a nation. He engaged in a good deal of
writing that was far removed from mainstream economics, and he engaged in what today
would be regarded as scandalously odd and moralistic judgments about immigrants and
the races. Commons’ quirks did not stop him from zeroing in on how the state of
working conditions could be improved by new institutions such as unemployment
insurance, safety regulation, and workers compensation.
Commons’ specific contribution to workers’ compensation was his tireless advocacy of
working for reasoned solutions to differences between labor and employers. His lucid
outline of a pragmatic solution to workers’ compensation before the leadership of the
Merchants and Manufacturers Association of Milwaukee (MMAM) in 1909 won new
converts among employers to this controversial legislative proposal circulating among
labor advocates.
To advance reform, Commons’ strategic vision and gifts for educating and persuading
needed to be augmented with good legal craftsmanship. Another University of
Wisconsin graduate and faculty member, Charles McCarthey helped write many of the
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major reform laws of the Progressive era, including the workers' compensation law and
workplace safety law of 1911. According to the Wisconsin Historic Society, “McCarthy
believed that knowledge could have a practical impact on the needs and aspirations of the
people, and he advocated the use of university resources to address societal issues, an
innovative educational approach that became known as the ‘Wisconsin Idea’."
Theodore Roosevelt was enamored with The Wisconsin Idea and held out Wisconsin
Progressives as a model for the nation in making social progress practical. He singled out
McCarthy for high praise:
The Wisconsin reformers have accomplished the extraordinary results for which
the whole nation owes them so much, primarily because they have not confined
themselves to dreaming dreams and then to talking about them. They have had
power to see the vision, of course; if they did not have in them the possibility of
seeing visions, they could accomplish nothing; but they have tried to, make their
ideals realizable, and then they have tried, with an extraordinary measure of
success, actually to realize them. . . .
Moreover, Mr. McCarthy deserves especial praise for realizing that there is no
one patent remedy for getting universal reform… They must carefully plan how
and what they are to construct before they tear down what exists…”7
Who were the factions in the political debate over reforming workers’ compensation?
What were their positions and how was compromise reached?
By the turn of the 20th century, organized labor had amassed considerable strength and
sophisticated leadership. Of the two major labor organizations in Wisconsin, the
Wisconsin State Federation of Labor was most active in the formulation of the new
workers’ compensation law. The WSFL led by Fred Brockhausen and Frank Weber
twice prompted the introduction of legislation to create a workers’ compensation system
patterned closely after the British law of 1903.
Labor leaders could be quite hostile to the business establishment and what the termed
“the capitalistic” economic system, i.e., free market driven. The head of the WFL once
wrote to Samuel Gompers with a caustic comment about workers being betrayed by the
Wisconsin legislature because workers “voted the capitalist dogs into power once more.”8
Preface to “The Wisconsin Idea” found in Charles McCarthy, The Wisconsin Idea, 1912, ch IX.,
available from the Wisconsin Historic Society web at:
http://www.library.wisc.edu/etext/WIReader/WER1650-2.html
8
Asher, op cit, p 126
7
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But labor was not monolithic on their views regarding capitalism and their willingness to
work with the established class of employers.9
Wisconsin labor leadership was relatively willing to meet with employer groups to
discuss workers compensation legislation, at least compared to their counterparts in New
York State. Brockhausen and other labor leaders met several times in 1910 with drafters
of the workers compensation bill to be introduced the next year. Reportedly, the business
community was reassured by their constructive comments on fair benefits balanced with
employer financial concerns.10
No less heterogeneous was the composition of interests in the business establishment.
Naturally, some business owners staunchly defended the status quo. But Wisconsin
appears to have had an uncommonly large number of businessmen aligned with the
Progressive Movement..
The Progressive Era has been called Wisconsin’s “Golden Age.” During this remarkably
time a long list of path-breaking legislation enacted to respond to the issues of the
industrial age. In popular belief, Robert M. LaFollette, who served as Governor from
1901-06, is often given credit for most of Wisconsin’s remarkable legislative
accomplishments of the Progressive Era. However, Francis McGovern, inaugurated as
Governor in 1911, supported many legislative accomplishments in economic reform.
McGovern deserves due for his role in enacting workers’ compensation, as well as
establishing a powerful Industrial Commission to regulate workplace safety and
improvements in working conditions for women and children.
Many employers were partisans of the Progressive Movement. They were sympathetic to
the institution of workers' compensation, largely because they saw its acceptance in the
two great industrial powers of Germany and England. The Wisconsin Progressive
Movement had several factions that favored workers' compensation legislation, though
they differed on details. Historian Robert Asher called this progressive business faction
“Jeffersonian conservatives,” describing their view of economic progress as “prosperity
through regulated enterprise in a developing community.”11
The final interest group that should be mentioned is the German immigrant population of
Wisconsin. In 1900, Germans were the largest ethnic group in Wisconsin, with German
born immigrants comprising ten percent of the state population. The population of first
and second generation German immigrants was so large in Milwaukee and the industrial
corridor of the state that German was the vernacular of many towns and neighborhoods.
These Germans came from a country with a strong and proactive role in providing for a
wide range of social insurance, including health benefits, retirement and workers’
9
Edwin Witte, like Commons the head of the University of Wisconsin Dept. of Economics and one of the
great leaders in social insurance, characterizes union leadership in Wisconsin as “trade unionists first and
Socialists second.” Asher, op cit, p. 126. The great labor organizer Samuel Gompers, was like many
others in the movement, a “two card union man”: membership in the radical socialist Knights of Labor and
a card from the cigar workers union.
10
Asher, op cit. p 126
11
Ken Acrea, cited by Asher, op cit p 24.
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compensation. Many firms run by Germans adopted “welfare capitalism” like the ones
they were familiar with in Germany. German newspaper editors, most prominently
Victor Berger, tireless praised the paternalism of German employers and lightened the
way to workers’ compensation reform.12 Thus, both German workers and German
business owners were quite comfortable with the notion of the state passing a law to
guarantee benefits to injured workers.
So popular was the German system that Commons could comfortably suggest it as a
principle source of guidance in the model he presented in the aforementioned 1908
speech to MMAM. To Commons, the Germanic model was more acceptable than the
English model that labor had used as the template for bills they unsuccessfully
introduced in the Wisconsin legislature. The characteristic feature of the German system
that appealed to Commons: compulsory mutual insurance, run by associations of
employers, and without contributions by the employees.
As is usually the case in major reform legislation, discussion of options and coalition
building take time. Labor and employers, and all the factions within each camp, battled
over issues like opting out of the system, how the costs of benefits should be financed,
and when workers would have the right to sue employers. These were complex issues
and mistakes could set the system off on a very bad course. Fred Wilcox, appointed
Chair of the Wisconsin Industrial Commission in 1921, wisely noted:
The initiation of programs, such as workmen’s compensation, usually has come at
the end of bitter and prolonged campaigns…Indeed, it is the guaranty against illconceived action. Disappointment and caustic, heated criticism follows close in
the wake of action, but it wears away…”13
By 1909, the debate had ended. Leaders of both the labor and management camps,
encouraged on by Commons, were ready to advance some form of workers'
compensation. All sides agreed that passing a law drafted in haste would be a mistake.
An Industrial Insurance Committee of the legislature was appointed to craft a bill for
introduction in 1911.
The next luminary in the history of Wisconsin’s pioneering workers’ compensation law
was State Senator Albert Sanborn of Ashland, who chaired this Industrial Insurance
Committee. Sanborn, who represented both plaintiffs and defendants in tort cases, was
keenly aware of the waste and inequity of the tort system—then the only remedy for
compensating injured workers. Sanborn steered the committee to address: 1) whether the
new system should be compulsory or elective, and 2) the extent to which employers'
common law defenses should be eliminated. The committee, looking to New York
attempt to forge a workers’ compensation system aborted by the New York Supreme
Court on constitution grounds, decided against a compulsory law. They feared it would
likely be struck down as violating constitutional due process rights of employers and be
politically challenging to pass.
12
13
Asher, op cit., p 127.
Fred Wilcox, Looking Back 25 Years, Wisconsin State Journal, May 3, 1926. Madison, WI
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Interestingly, organized labor favored the retention of a right of action in tort for injured
workers as an option to accepting workers’ compensation. This is along the lines of the
British system which they favored. In the end, the committee compromised on giving
workers the right to opt out of the system via a written statement to their employer before
the time of injury.
The committee also reached a consensus that two of the major common law defensesassumption of risk and the fellow-servant doctrine-should be denied to employers who
opted out of the new system. This made it foolhardy for most employers to opt out.
Clearly, the restriction of common law defenses was the essence of the new law, and the
source of the greatest concerns about its constitutionality. The “Great Compromise” of
worker's compensation depended on most employers giving up their common law
defenses for limited liability that was clearly fixed by law, and if most workers were
willing to trade the their right to seek full compensation for all their damages in court for
a smaller but certain recovery not based on fault.14
The committee’s work was a resounding success. Its legislative proposal was embraced
by the key stakeholders and the bill passed with little change or dissent in 1911.
The Fledgling System
The heated criticism Wilcox foresaw with major social change like the workers’
compensation act showed itself in a court test of the new law. The law was challenged by
some employers for a violation of the equal protection clause of the Constitution for
taking away some of the common law defenses of employers who chose to participate in
the voluntary system.
This was a critical stage in the birth of workers’ compensation. The new law could have
been aborted by on constitutional grounds as in New York in 1910. But the Wisconsin
Supreme Court now stepped in to play a role in Wisconsin’s legacy to worker protection.
Seated on the Wisconsin Court were jurists whose well reasoned, positive opinions
regarding the many reforms of the Progressive Era became important precedent used in
other state courts regarding constitutional challenges.
In this critical constitutional review of the Wisconsin workers’ compensation law, the
Court unanimously affirmed its constitutionality. A specific complaint of the employer
was that it extended coverage to non-hazardous jobs. The court strengthened the rights of
14
Joseph Ranney, Law and the Progressive Era, Part 3:
Reforming the Workplace, Wisconsin Lawyer, Wisconsin Bar Association, found
April 2011 at:
http://www.wisbar.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/Content
Display.cfm&CONTENTID=35854.
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employees in holding that the law covered even individuals employed in "non-hazardous"
trades.15 Ranney credits the Wisconsin Supreme Court with a key role in sustaining
progress in workers compensation and safety regulation by refusing to use the
"substantive due process" doctrine to strike down workplace reform laws. In the years
that followed, the constitutionality of workers’ compensation laws in the other pioneering
states laws was likewise affirmed by their Courts.
The Supreme Court, in brushing aside constitutional arguments against the new law,
exposed an intellectual tension between the Justices on the juristic rationale for
supporting radical reform legislation. How should the constitution be interpreted to apply
to new economic and social issues and problems?
Chief Justice John Winslow in his opinion waxed eloquently about the need for the court
to think expansively about the role of the state in governing economic change:
Where there is no express command or prohibition [in the Wisconsin
constitution], but only general language or policy to be considered, the conditions
prevailing at the time of its adoption must have their due weight, but the changed
social, economic and governmental conditions and ideals of the time, as well as
the problems which the changes have produced, must also logically enter into the
consideration, and become influential factors in the settlement of problems of
construction and interpretation. 16
Justice Marshall, far more conservative in philosophy of law but a man who could see the
merit of workers’ compensation, sought to temper Winslow’s activist language. Marshall
could see the original intent of the state constitution as supporting the new law.17 Writing
in the unanimous opinion, Chief Justice Winslow extolled the workers’ compensation law
as "…a way by which employer and employed may, if they so choose, escape entirely
from that very troublesome and economically absurd luxury known as personal injury
litigation."18
Wisconsin wisely required employers to pre-fund payment of statutory benefits. John
Commons was opposed to a state administered insurance fund; fearing elective officials
“subject to popular influences”19 could not be trusted with large sums of money. What he
seemed to have in mind was a statewide employers’ mutual insurance fund. All but one
of the first round of states to pass workers’ compensation felt the same way and elected to
have private insurance. Most did this through the purchase of workers’ compensation
insurance sold by insurers in a competitive market.
15
Borgnis and others v. The Falk Company 147 Wis. 327 (1911).
Cited by Charles McCarthy, The Wisconsin Idea, 1912, ch IX., available from the Wisconsin Historic
Society web at: http://www.library.wisc.edu/etext/WIReader/WER1650-2.html
17
Ann Walsh Bradley and Joseph A. Ranney, A Tradition of Independence: The Wisconsin Supreme
Court’s First 150 Years, Wisconsin Magazine of History, Winter 2002-2003, found June 2010 at:
http://www.wisconsinhistory.org/wmh/pdf/wmh_winter02_bradleyranney.pdf
18
Borgnis, 147 Wis. 327, 133 N.W. 209 (1911) at 337.
19
Asher, op cit, p 129
16
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On September 1, 1911, the date the law became fully effective, a mutual insurance
company began operations in a one room office in downtown Wausau. The company,
formed by a group of central Wisconsin businessmen (“The Wausau Group”) as a means
of meeting their responsibilities under the new law, became known throughout the world
as Employers Insurance of Wausau. The purchaser of the first policy issued by the
fledging insurance company was Wausau Sulphate Fibre Company of Mosinee, later
known as Mosinee Paper Co, and now known as Wausau Paper. The policy is
recognized as the nation’s first valid workers’ compensation insurance policy.
Wisconsin insurers like Employers Insurance of Wausau and Sentry Insurance20
eventually became giants in this line of insurance. These first workers’ compensation
insurers were mutual companies, i.e., they were owned by their policyholders. This
seemed to go a long way in relieving the concerns of many Wisconsin employers over the
unreasonable defenses against claims used by stock insurers headquartered in
Connecticut and New York.
Workplace safety was a critical concern to many labor leaders and members of the
Progressive Movement. Insulating employers from punishment for their negligence
worried many labor leaders. To respond to the a broad consensus view that safety ought
to be promoted more forcefully than ever before, the 1911 Legislature created a powerful
new state agency, the Wisconsin Industrial Commission. It also created the first safe
place statute in the United States. According to Ranney21, the new commission was
given broader powers than any other administrative agency in Wisconsin, and perhaps in
the United States,- had ever received. The Legislature directed the commission to
conduct investigations and to take actions necessary to make the workplace "safe," and
gave it power to create legal standards.22
At issue in the new law was how far the commission could go in setting tough new
standards. . The writers of this law, principally John Commons and Charles McCarthy,
expert in the Legislative Reference Library, feared that absolute, strict liability would
invite a constitutional challenge as it did in other states. Instead, they devised a more
legally defensible tactic: requiring employers to make their premises "safe," and defining
"safe" as providing "such freedom from danger ... as the nature of the employment will
reasonably permit." This became the legislative mandate to the commission.23
Rapid Expansion
20
It was founded by members of the Wisconsin Retail Hardware Association, now the Midwest Hardware
Association, to provide insurance for its members and was originally called Hardware Mutual.
21
Joseph A. Ranney, Law and the Progressive Era, Part 3: Reforming the Workplace,
Wisconsin Lawyer, found June 2010 at:
http://www.wisbar.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentD
isplay.cfm&CONTENTID=35854
22
Joseph A. Ranney, op cit.
23
Ranney, op cit.
Copyright IAIABC, 2011
July 2011
The merits of the new system were so obvious that a parade of states passed workers’
compensation laws. Nine other states vied with Wisconsin for passage of the first
workers’ compensation act in 1911: Nevada, New Jersey, California, Washington,
Kansas, New Hampshire, Ohio, Illinois, and Massachusetts. The geographic and
economic diversity of these “charter” states demonstrates the broad appeal of the concept.
Twenty five years later, Arkansas and Mississippi were the only states without such a
law. Today, every state and territory has its own workers’ compensation law.
State laws and administrative practices vary, but they all incorporate the following
principles:





Rapid, fixed compensation for lost wages from a work injury regardless of whose
fault caused the accident
Full payment of all medical care and rehabilitative care necessary to cure or
relieve the injury
Some payment of compensation for permanent or residual consequences of an
injury, such as the loss of a limb
A fixed amount for death benefits to be paid to the survivors of a fatally injured
worker
No other payment obligations from the employer beside what is allowed under
workers compensation
The original nine states’ workers’ compensation acts were vastly different than the laws
in those same states today. . Hundreds of clarifications and improvements were needed
to these fledgling laws. One glaring example is the original exclusion of occupational
diseases from coverage. Today, all states cover a very broad range of occupational
diseases. Another major change was broadening the scope of employers covered by the
act. Workers’ compensation did not become compulsory for all employers in Wisconsin
until 1932. Today, 98 percent or more of employees are covered in most states.
The system works remarkably well in most states. For example, in Wisconsin nearly
120,000 medical and wage loss claims are received annually by employers or their
insurer. Only about 1 or 2 percent of lost time claims are denied. Indemnity checks to
injured workers begin within two weeks of the injury. There is very little legal dispute
about what should be paid or who is responsible for the claim. An automatic system with
prompt payment of claims is perhaps the greatest testament to the design of the historic
1911 legislation.
Workers’ compensation was the first form of social insurance in American history with a
countrywide scope. The state based development of these laws predictably generated
wide difference in coverage, benefits, and administration across the states. These
inconsistencies were more tolerable in an era with fewer multistate operations by a given
firm, less cross border migration of workers, and huge wage and employment differences
Copyright IAIABC, 2011
July 2011
across the states. However, the differences in compensation for injury in state laws have
drawn sharp criticism by labor unions and academics.
Seemingly arbitrary differences in benefit payments are hard to defend. But, a clear
benefit of state workers’ compensation is its solvency and sound funding. Unlike other
social insurance programs controlled at the federal level, no state workers’ compensation
system runs a significant deficit, or is in risk of defaulting or reducing future benefits
because of fiscal shortfalls.
Conclusion
The unique state base application of workers’ compensation will continue to draw
criticism and support in the years ahead. Judging by the major evolution that has
occurred within state laws, and the convergence on some governing principles, there is a
good chance that state systems will continue to evolve in such a way that benefits and
their administration are harmonized enough to forestall federal preemption. Only time
will tell if this is the path or if workers’ compensation is to go the way of federal
disability insurance or unemployment insurance.
So, whether you work behind a desk, drive a vehicle, or walk beams on high rise
construction sites, your life is far more secure because of the dream of a few bold
Wisconsinites who had a vision to create a new way of responding to work injury. They
brought about social change with persuasion, not force. The power of reason, a sense of
justice, and a practical sense of how the real world operated came to bear on designing
the Wisconsin law. They pioneered a system with protection that is so solid and
automatic that workers now take for granted the safety net that protects them and their
families.
__________________________________________
Greg Krohm has been the Executive Director of the International Association of
Industrial Accident Boards and Commissions (IAIABC) since 2000. Prior to that, he
served as the Administrator for Workers’ Compensation and the Deputy Commissioner
of Insurance for the State of Wisconsin. He serves on the National Academy of Social
Insurance Workers’ Compensation Task Force, the Insurance Data Management
Association Board, and as a reviewer for the Workers Compensation Research Institute.
Krohm holds a PhD in economics and is a Chartered Property and Casualty Underwriter.
He has published frequently in trade and scholarly journals on the subjects of insurance
and workers’ compensation.
International Association of Industrial Accident Boards and Commissions
5610 Medical Circle, Suite 24
Madison, WI 53719
608-663-6355
Email: gkrohm@iaiabc.org
Web: www.iaiabc.org
Copyright IAIABC, 2011
July 2011