( Originally Published 1911 )
Workmen's compensation defined.—The basic difference between workmen's compensation and employer's liability is that under employer's liability about one accident in eight and one-half that occurred in industrial plants was subject to compensation. This is the record running through a series of years, leaving seven accidents and a half to be borne by the individual.
Workmen's compensation aims to charge to the industry the cost of the human material, so to speak, as well as the cost of the other material used in the business. If, say the advocates of workmen's compensation, you pay for the machinery and raw material which you use, why should you not pay for the humans you use up in turning out your product? There seems to be no room for difference of opinion on this point. The accepted view of workmen's compensation is that those engaged in an industry should be compensated by that industry. Workmen's compensation, in other words, should be regarded as part of the cost of a product, as an element of the cost of production finally paid for by the ultimate consumer of the product.
Acts of foreign countries.—In the United States we lag behind other nations, so much so, in fact, that the workmen's compensation acts of foreign countries should be briefly reviewed.
The first workmen's compensation act was passed in Germany in 1884. Germany, therefore, has had considerable experience with workmen's compensation. The experience has been in the main satisfactory.
Germany began with a limited class of workmen who were compensated. That class has been extended somewhat, although the present proviso in Germany is not as broad as in many other countries. Generally speaking, the present German law is limited to work-men in industries. This limitation will, in a general way, be found in nearly all the countries in which workmen's compensation has been adopted as the basis for establishing the obligation of the master to the servant in the event of injury. Seamen are usually treated separately, under a special act fitted to their conditions. The same is true of miners, and sometimes of railroad men. Occasionally the provisions of these acts cover agriculture, as is true at present in Great Britain, Denmark, France and Italy. France and Belgium include employes in commerce, by which is meant the ordinary clerical employe. Great Britain adds employes in domestic service. Altogether, there are twenty countries in continental Europe, including England, in which workmen's compensation in some form is now operative. Several Canadian provinces, too, have workmen's compensation laws, based largely upon the English act. All of these acts have some limitations, although the general purpose of the acts is to compensate for substantial injuries. It is almost universally stipulated in these acts that the in-jury must arise out of and in the course of the employment—that is, must be an occupational injury.
Limitations in foreign countries.—There is a further limitation in many countries regarding the amount of annual wages to which the act applies. In some cases those earning more than these stipulated amounts get no benefit of the workmen's compensation, having only their rights at law; in others they get the benefit of their compensation up to the . stipulated amount, and nothing beyond that. In England the amount is $1,250. In Germany it is about $750 in some kinds of employment, and unlimited as to workmen in industry. In Norway the limitation is $325 per year; in Denmark, $650 per year, with a further limitation to $410 for agricultural pursuits. Belgium limits wages to $4S0; Italy to $420; and Austria to $480. The measure of recovery, that is the proportion of wages usually assessed for compensation, is 50 per cent in a great many countries, England among them. In Germany the compensation is two-thirds the wages, this percentage, however, being subject to variations under some conditions. For instance, an injured workman may accept so-called "hospital benefits," in which case he receives only 60 per cent of his wages. There are also certain cases where the Court, or the officer who has jurisdiction, allows full wages for a limited period of time, as, for example, in a case where the injured might be in extreme suffering, necessitating the immediate spending of large amounts of money for nurses and expert medical services. Norway, Denmark and Austria provide 60 per cent; Holland, 70 per cent.
Fatal injuries.—Provisions for fatal injuries vary with the different countries. Great Britain provides simply for three times the annual wages, not to exceed $1,500. Denmark follows the English rule and provides four years' earnings, with a trivial allowance for funeral expenses. In Italy five times the yearly wages are allowed. Other countries generally allow a percentage. Germany, for example, allows twenty days' wages for funeral expenses, and thereafter compensation proceeds on the theory of a pension to the survivors, equal to 60 per cent of the earnings. Austria allows $10.00 for funeral expenses, and a pension of 50 per cent to the survivors. Sweden provides a trivial allowance for funeral expenses, and an annual pension not to exceed $80. The provision in Holland is practically the same as that in Germany. In Belgium the pension is but 30 per cent of the yearly wages ; in France it is 60 per cent. Pensions, where they exist, continue so long as the dependency continues and then cease. Pensions to minors usually cease when they become of age, to widows when they remarry, and to other relatives when the dependency ceases for any cause.
Losses.—The next proposition involved in work-men's compensation is the distribution of losses. Five continental countries—Germany, Austria, Holland, Norway and Italy—distribute the loss by means of compulsory insurance.
Forms of insurance organization.—In Germany insurance organizations are customarily divided according to trades and are called "Trade Unions." The arrangement is representative, every employer being obliged to be a member of the trade union in his particular locality, where those of his industry are also gathered. These trade unions in one form or another handle both the accident and the sickness. The accident obligation is discharged entirely at the expense of the employer; the sickness is divided between the employer and employes, the employes paying two-thirds, the employer one-third. The arrangement, then, is representative in its character.
In Austria a different plan is followed. There the insurance organization is of the same character and compulsory, but the trade unions, or guilds as they are some-times called, are territorial.
In Norway, the insurance is a state monopoly, operated entirely by the state, and it is a rule there to require contributions for loss only, the state paying all expenses.
In some of the other countries, with both voluntary and compulsory insurance, there are state institutions. Private or mutual insurance companies are usually permitted to operate, however, and generally they operate very successfully against the state institution, sometimes almost to the exclusion of state insurance. This condition exists in Holland, where private institutions are permitted to exist in addition to a state institution.
The German rule is to collect merely the premium necessary for immediate disbursements. If a claim is paid in Germany, it is paid by the post office. If any particular guild or bund has occasion to pay one of its number anything, the members go to the post office and get the money. At the end of the year the statistics are made up by the government. The sum is divided among the members of the guild. Assessment is made, and members are supposed to pay their premiums at once. If they do not, the government collects the premiums as taxes. When premiums are paid, the advances are re-turned to the post office, and the debt is discharged. The post office receives 5 per cent interest, which is also provided for in the assessment.
There are five more prominent countries representing the other plan of workmen's compensation, where the distribution is accomplished by voluntary insurance—Great Britain, Sweden, Belgium, Denmark and France. In Belgium there is a compulsory insurance for miners. In France and Denmark there is compulsory insurance for seamen. Otherwise, the insurance in all five countries is purely voluntary, as it is in this country.
Sick fund.—As a general rule, trivial injuries are not admitted for compensation. In some countries, notably Germany and Austria, the first period of incapacity is taken care of by the sick fund. In both countries there is a sick fund running alongside of the accident fund. To this sick fund the employe has to contribute two-thirds, the employer one-third. The, accident fund is paid entirely by the employer in Germany; and nine-tenths by the employer in Austria.
The first period is variously provided for. In Germany thirteen weeks must elapse before the accident fund begins to apply; that is, if a man receives an injury from which he recovers in thirteen weeks or less, his compensation is charged to the sick fund. The sick fund, it should be remembered, is supported two-thirds by the employes and one-third by the employer. If the injury incapacitates the employe for more than thirteen weeks, everything beyond that becomes a charge upon the accident fund, solely at the expense of the employer.
In Austria the same rule applies, except that the time is five weeks. After this time the case becomes a charge to the accident fund.
In connection with the German sick fund, if the sickness is in the nature of a disease not due to accident, the sick fund carries the case for twenty-six weeks instead of thirteen.
In England certain occupational diseases are treated as accidents, and are so compensated. The English compensation act, however, provides no compensation for the first week, nor is there any other provision for this interval. Whatever sickness provision exists is through the friendly societies, and through voluntary insurance, just as in this country.
Norway follows the plan of Austria, excluding the first five weeks, which are chargeable to a sick fund.
This sick fund has a provision that is a little peculiar. There, the workmen contribute six-tenths of the sick fund, the state two-tenths, the employers one-tenth, and the commune or local government one-tenth.
Legislation in the United States.—In the United States there is a Federal act covering certain employments, such as the construction of drydocks. But so far as the individual states are concerned, there were not in force in this country, prior to September 1, 1910, any workmen's compensation acts. On that date an act be-came effective in New York State which covered some eight dangerous employments. The act was declared unconstitutional by the Court of Appeals on the ground that it was taking property without due process of law. This led to an agitation for the amendment to the State Constitution. The amendment was duly passed and the Workmen's Compensation in New York State based on this constitutional amendment came partly into force January 1, 1914, and became fully effective six months later.
After having taken the matter under consideration, the various states have moved with commendable zeal to remove the employer's Iiability condition and to provide compensation acts. In twenty-two states these acts are now in force, and in the near future similar acts will doubtless be passed in the other states. These compensation acts provide, primarily, for the wiping out of the three defences previously enjoyed by the employer and place the whole question of accidental injury on a basis of compensation.
Compensation acts summarized.—The general summary of these twenty-two laws runs about as follows:
In sixteen of the states the law is elective, a provision mainly for the purpose of covering some constitutional condition, as wherever the law is elective it has usually been adopted by the great percentage of employers and employes. In six of the states the law is frankly compulsory.
The laws do not provide for payment until a certain period of time, known as a "waiting period." In fourteen of the states it is two weeks and, in the others, one week. Medical or surgical aid, although no other money compensation, is furnished during this waiting period. The benefits provided are based, naturally, on dependency, which varies according to circumstances. For example, the case under consideration may be a widow with children, or orphan children, or there may be cases where there are partial dependents or no dependents. Where there are no dependents, burial expenses only are provided, these expenses averaging about $100 in each of the states. In the case of dependents, however, there are greater variations, and it is probable that we shall go through a process of evolution before the proper amounts can be determined.
The compensation, of course, is based on the salary which the injured party has earned, and the benefits based on this salary run from 50 per cent up; in two of the states it is 66i per cent, and in one, 65 per cent. To illustrate : In Arizona, a widow would receive 2,400 times the daily earnings, which, allowing 300 working days to the year, would be the equivalent of eight years. In New York State, the widow receives 30 per cent of the weekly salary for life. As a rule, dependent children receive, up to the age of eighteen, 10 per cent of the weekly wage in addition to what the mother will receive. Orphan children normally would receive more, as there is no widow in their case to be taken care of or to assist in the care of the children. For partial dependents the compensation is pro rata, that is, it is based on the contribution which the deceased made when he was living. For instance, if he was turning in a tenth of his salary, the compensation would be based on that fractional amount. In most of the states there is a minimum limit, as of $5 per week, and in many there is a maximum payment. California, for example, sets the figure at $5,000. Under the New York law, where the compensation to a widow is for life, there is practically no limit to the sum that may be paid. In the case of widows the question of re-marriage enters and the practice is to pay a lump sum at the time of the second marriage, the benefits ceasing from that time. Total disability is taken care of in much the same way as the death benefits. It is recognized, of course, that total disability is likely to bring with it quite an additional expense in the care of the afflicted person. In New York these benefits run from a minimum of $5 up to a maximum of $15 per week, the payments continuing, of course, until death.
The problem of providing adequate or equitable compensation is not especially difficult in a case of total disability or of death. Partial injuries, however, furnish more of a problem. Provision has to be made for the loss of fingers, beginning with the thumb and running through each of the fingers, also for the toes and for the hands, arms, feet, legs and combinations of such losses, likewise for any accident affecting eyes or ears. Payments on these cases usually run for a stated number of weeks according to the nature of the injury; thus, in Connecticut the loss of a thumb furnishes compensation for thirty-eight weeks, but not to exceed $380. None of the other fingers rank as high, apparently, except the index finger, which in many cases ranks the same as the thumb.
The New York State Law.—The New York State law' is probably the broadest and most inclusive of any now on the statute books. Practically every employment is included within its provisions, forty-two groups of occupations being mentioned specifically and to each the term "hazardous" applied. Farm labor and domestic service, however, are excluded from this list of employments, nor are states, municipalities or other political subdivisions included under the term "employer." The law sets forth the various classes of in-juries and the compensation appropriate to each, explaining, too, the method of procedure to be followed by employes in securing compensation and by employers in meeting the provisions of the law. The administration of the law is through a Workmen's Compensation Commission.
Some evil effects in France.—The claim is made that in the mind of the employe, workmen's compensation tends to aggravate injuries. In point, the experience in France for a certain period is of interest. In minor accidents in France the judges have a tendency to rule rather harshly against the employer; moreover, the injured workman can select his own physician and apothecary. The claim is made that these two things combine to increase the cost. Statistics show that of the number of employes injured in 1904, there were 1,753 cases of injury remaining for a period of five days. In 1906 this number had increased 25 per cent; while the number injured for seventy days or over in 1904, 1,533, had in two years risen to 2,019, an increase of 32 per cent. Taking all of the statistics, the increase of the number of days of injury was 47 per cent. Between 1904 and 1906 the number of accidents not over ten days had decreased 2 per cent, while those over ten days increased 96 per cent.
Such conditions are largely due to special conditions of the law which pays the return somewhat on the number of days of injury. There has been an increase in the clinics and dispensaries that have been established especially to deal with these matters and all probability this has been because of the business element, that is, be-cause there has been money in it for someone. The whole compensation plan, too, has been adversely affected and it is stated that physicians, too, have not hesitated to advance prices in other things where such laws have been established. The apothecaries, apparently, have promptly followed suit. In many cases the physician's charge has exceeded the sum which went to the work-man for compensation.
Experience in the United States.—In the United States these laws have not been in force long enough to warrant conclusions as to their effect. A period of five or ten years must elapse before trust-worthy data can be secured. The first state in this country to furnish any statistics was Washington. Here the insurance companies are not allowed to operate, the whole matter being handled by the State through the Industrial Insurance Commission of Washington.
Experience in New York.—In the State of New York the law became effective for accident reports July 1st, 1914. The first month indicated that about 1,000 claims a day were being received, while in the first twenty-three days there had been forty-eight deaths. It is impossible to estimate what proportion of these claims will prove to be entitled to compensation, but it is considered that, under the New York law, it will be about one-third. This is larger than the Massachusetts experience, where the proportion was about one in four, probably because the New York law is more liberal than the Massachusetts law. In the first twenty-three days in New York State there were 48 deaths, and, assuming that all these were subject to an award, it would indicate 624 fatal accidents for the first year.
Accident prevention.—It is not to be supposed that as the source of many accidents becomes known they will be or will have been permitted to remain unguarded. Along with the work of fire prevention the work of accident prevention is developing with rapid strides. Here, again, the foreign nations have led the way, and museums of safety have been developed on the other side, some fifteen in number. In these museums are gathered for exhibition the different types of devices that may be used in preventing accidents from machinery. Plans for quick aid or "first aid," as it is more commonly called, are also illustrated fully by means of models, and in the case of prevention devices, by actual examples of the machinery in position with the devices attached.
In this country we have as yet established but one such museum, in New York City, but with the increasing demand to keep down the cost of workmen's compensation, we may look for the rapid multiplication of these museums in various parts of the country. All the insurance companies—and this of course is true of the commissions in charge of the matter in those states where companies are not permitted to operate—maintain extensive prevention bureaus which have developed out of their experience in insuring risks, and through the suggestions of their expert inspectors ; but what has been done is probably very small as compared with what will be done.
Cooperation.—The mistake must not be made of supposing that mere machinery devices are of them-selves sufficient to wipe out the cause of accidents. Some will occur even when machinery perfection has been attained. As a matter of fact, only a certain proportion of the accidents (about 25 per cent) can be prevented by protective devices. The others can be prevented only by good management, and quite as important, by the effective cooperation of the employer and the employe. The method of securing this co-operation is to form in a shop or plant a committee of safety whose duty it is to care for this part of the work. Some form of reward or slightly extra compensation is granted the members for their services, but the emphasis is placed on the fact that the majority of accidents are needless and that they should accordingly be prevented.
Safety suggestions.—One of the regulations published prefaces its specific recommendations with these general suggestions :
Do not give this booklet a mere glance and then throw it away. Keep it, read it and study it until you understand it, know it by heart. The men that compiled it know from experience that if instructions and warnings contained therein are understood and followed in your daily work, you will be instrumental in lessening accidents in the shop where you are employed.
You would not wilfully inflict an injury upon yourself, nor upon your fellow workmen. Nearly all accidents are due to carelessness on somebody's part. You owe it to yourself, to those dependent upon you and to the nation of which you are a part, to use all reasonable care to prevent accidents happening either to yourself or to your fellow workmen. Remember, if you are injured your income is decreased or stopped. If your injury proves permanent, you are a cripple for the rest of your life, which will decrease your chance for success. You want to avoid this if possible and it is possible if you do your duty.
The owners of this establishment request your hearty co-operation in making it safe for all employes. To this end if you discover any dangerous places around the shops that could be and are not guarded, notify your foreman at once and they will receive attention. If you think that a certain class of work can be performed by a safer method than the one now used, draw your superior's attention to the fact and it will be given immediate consideration. If you see one of your fellow workmen particularly reckless, thereby jeopardizing himself or others, tell him about it, caution him, and if this fails to make him more careful, report him to the foreman or superintendent.
Carefully read these rules, be sure to understand them and then carry them out in daily practice.
Another company prints on each policy the following recommendations as to things that could be done:
Elevator openings on each floor should be guarded by gates or floor doors. Persons using elevator should not, for any purpose, be permitted to wedge or prop up gates. Unused sides of shaft should be cased in to a height of at least seven feet, either with joined boards or substantial wire screening.
All belts passing through floors, or vertical shafting operating through floors, should be cased in to the height of four feet.
All circular and band saws should be guarded, when possible to do so, and employes compelled to use such guards at all times.
Protruding set screws in collars and couplings on line and countershafting should be covered or countersunk.
Set keys in hubs or fly or other wheels should be cut off flush with the end of shaft or covered with tin casing or other material fitting closely to shaft, forming a smooth surface.
Shafting beneath sewing machine tables, and all other shafting on or near floors should be covered.
Loose pulleys should be used wherever possible, so as to throw a saw, jointer, shaper or other piece of machinery out of action, when not necessarily in use, and employes instructed to throw out of motion such machine when leaving same even temporarily.
Shifters should be used at all times, for shifting belts, and no employe should be allowed to shift a belt with his hand or stick. Belts should be laced and adjusted when machinery is not in motion.
Shapers and jointers should be guarded and guards kept on at all times.
All cog gearings should be completely cased in, casing to be made of wood or metal and so constructed that it can be easily removed when necessary to repair or oil.
All roll feed machinery should be well guarded by placing strip of metal the entire length of roll, as close as possible to roll, to prevent operator from getting fingers between rolls while feeding.
All fly-wheels, engines and belt wheels should be enclosed by casing in or placing substantial railing around them, either of wood or gas pipe, the latter being preferable and more substantial.
Roller, suspended and sliding gates and doors should be care-fully examined in order to ascertain that same are not liable to leave their track and fall or be blown down by the wind.
Stairways should be carefully examined for projecting nails or screws, and where rubber or other strips are placed on the treads, said strips should be secure and lie perfectly flat ; ragged carpets and oilcloths on both hallways and stairs should be re-moved.
Fire escapes should be secure and in good condition and kept clear.
No loose material likely to be blown from the roof by the wind, should be permitted to remain on the roof.
Sidewalks around property should be kept in good condition and coal hole covers and dead lights properly fitted and kept in place.
The factory laws of your state provide that most of the above mentioned suggestions and recommendations should be carried out where and when necessary. Your compliance with these laws will relieve you of additional liability in case of accidents, and will enable you to secure liability insurance at the lowest possible cost.
Methods of writing workmen's compensation.
Insurance companies and other interests have been divided in their opinions as to the way in which insurance should be written. In some states, notably Washington and Ohio, the entire matter is handled by a State Commission, though in these states a small part of the work may be done by stock companies. The State Commission, acting under the law, makes the collections and conducts what is in reality a regular insurance business, limited, of course, to this line—workmen's compensation. Other states, notably Massachusetts and New York, permit the companies to continue in the business, but plan other forms in order to insure competition. As a result there have developed four methods which are known in the State of New York as (1) The State Fund ; (2) The Mutual Association ; (3) Self Insurance; and (4) Stock Insurance.
The state fund.—The state fund is, in a certain sense, a Mutual Insurance Company, except that it has the backing and help of the state to the extent of receiving for a certain time the payment of its administration expense. This may prove to be, according to the volume of work, a not unsubstantial aid, since if the total payroll runs to half a million it will readily be seen what a large amount this is, although this expense aid will continue for only a couple of years. The same plan was followed in Massachusetts where the state fund was organized. In effect the state said, "We will set you on your feet and give you a start by paying these expenses for a couple of years. At the end of that time you should have worked out your own position and require no further state aid."
Mutual associations.—Mutual associations do not differ in the main from other mutual bodies. The general expectation is, of course, that they will be able to do business at a lower expense cost, and at a lower compensation cost, perhaps owing to the fact that the members theoretically may be more carefully chosen than in the case of a company doing a general business. The requirements are that there must be 40 employers employing not less than 2,500 workmen, who shall have agreed to take insurance in the mutual company before it will be permitted to start business.
Self insurance.-As to self insurance, if an employer is so situated that his financial ability is absolutely unquestioned and if he can furnish satisfactory proof to the Commission, he will then be permitted to deposit with the insurance Commission certain securities to cover the expected liability. The somewhat high standard necessarily imposed in this case to insure the payment of the compensation makes it doubtful whether it will be availed of to any large extent; and not many employers, probably, will care to assume the risk of a very heavy payment due to some unusual disaster in the plant.
Stock companies.—The stock companies conduct their business, as they always do, by accepting a certain premium for the service, and relieving the insured of any further liability in regard to the matter. Some advantage is claimed for the stock companies in that they are able to issue a policy which covers not merely the compensation indemnity but also the liability that may be outside of that act. In other words, the employer might get a complete cover from a stock company when it would be doubtful, to say the least, if he could do so in any other of the three forms of insurance.
The element of cost.—Experience has not yet satisfactorily demonstrated which result is going to prove best for the community. It is the community that must be considered; that is, it must be determined which method is the cheapest for the ultimate consumer. In states where the companies have been permitted to compete with the state funds they appear to have obtained a good share of the business. The average employer likes a freedom from contingent liability, backed by good assets, and probably this, as much as anything, explains the appeal which this form of insurance has for him. It is stated that in Michigan 89 per cent of the manufacturers continued their insurance or took it out in the stock companies. When the New York State act went into effect there were 32 stock companies included in the business, and 14 mutual companies.
Rates in the United States.—The rates in the United States are apt to be more or less theoretical owing to the fact that there is an insufficient amount of American experience on which to base them. The best judgment based on the experience of our own and other countries has been used. This will be superseded by actual experience as the acts develop in the different states and as experience is acquired. Only actual experience, of course, will show what the rates finally must be. In connection with the premium an important factor is being introduced, similar to the method of schedule rating in force in fire insurance, whereby the bad features will be charged for and the good features receive credit. Under the schedule now being worked out in New York State it is estimated that a maximum credit of 40 per cent may be allowed from the established rate when the plant is put in the best of condition. A most wholesome influence will be brought into the work as this method of making rates and determining premiums develops.