Workers’ compensation was established as America’s first social insurance program a century ago. The first state to enact a complete workers’ compensation system did so in 1911, followed by numerous other states including California, which established its system in 1913.
Often referred to as the “grand bargain” between employers and labor, the purpose of workers’ compensation is to provide prompt medical care to workers injured on the job, as well as deliver cash benefits to compensate injured workers for a portion of lost wages on a temporary or permanent basis. Workers’ compensation is designed to function as a no-fault system. There is no burden of proof for an injured worker to show employer negligence caused a workplace injury. It acts as the exclusive remedy for workers and employers to resolve workplace accidents without resorting to the court system.
Workers’ compensation is typically delivered through one of two mechanisms:
- Insurance – Employers may purchase workers’ compensation insurance from a private insurance company or the State Compensation Insurance Fund.
- Self-insurance – Employers, including very large employers and many public agencies, may choose to pay directly for their workers’ compensation costs. Smaller employers may also pool their resources to form self-insurance groups.
Regardless of the coverage mechanism, employers pay 100 percent of costs associated with the workers’ compensation system, inclusive of direct costs for medical treatment and cash benefits for injured workers, as well as costs associated with managing and litigating claims. In 2020, California employers paid nearly $19 billion in costs for 645,000 occupational injuries and illnesses.
