Workers’ compensation systems were created in the United States in the early 20th century to provide a system of compensation for work place injury. These systems were social engineering arrangements which were meant to serve the broader purpose of providing prompt medical treatment and cash payments to prevent the worker and their family from becoming homeless and thus a charge on the public as a whole. The idea was to spread the costs of work related injuries through the greater society as part of the costs of production. In exchange, employers were given protection from civil law suit and the employee was limited to workers’ compensation benefits. This arrangement is called the exclusive remedy. Today, employers and insurance companies only care about the exclusive remedy and are in the process of gutting what remains of the workers’ compensation system.
The most contentious element of the system has always been the method upon which permanent disability was determined. There is no easy way to determine what a blow knee, a bad back or carpal tunnel is worth. In a civil tort (personal injury) action, the damages are medical expenses, past, present, and future lost earnings, pain and suffering and in some cases punitive damages. The goal of a tort case is to fully compensate the injured person for all of his or her losses.
Since workers’ compensation is an alternative to tort law, the method of determining how to compensate an injured worker for permanent damage is also different. Workers’ compensation systems were never designed to fully compensate the injured worker for all losses. The reason given for giving less than full compensation is that the injured worker would “linger” (stay on benefits) and have no incentive to return to work.
Still, there was no set method on how to determine the value of permanent injuries when workers’ compensation systems were formed in the early part of the 20th century. In the early part of the 20th century until the 1970’s, most state systems utilized very different methods of calculating permanent disability. California chose a system that was used in Tsarist Russia.The stated goal was to compensate the injured worker for the injured worker’s diminished ability to compete in the labor market.
The permanent disability law percentage was based on the greater of the objective and subjective factors of permanent disability or the work restriction caused by the injury. Through the years the disability evaluation raters at the Industrial Accident Commission, and its successor, the Workers’ Compensation Appeals Board, formulated the percentages through custom and practice. There was no science to this system. In the early years of the worker’s compensation system, most permanent disability was based on a combination of objective and subjective factors with objective factors being the most important. In later years, work restrictions became the dominant factor in permanent disability ratings. The insurers and employers grew to despise the rating system because they viewed the subjective nature of the work restriction system and the wide variation in …