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Geaney: A Brief History of Our State's Workers' Compensation Act

  • State: New Jersey

For those who do not like workers’ compensation, blame Otto von Bismarck. 

John H. Geaney

John H. Geaney

Yes, the man known as the Iron Chancellor, who united all the kingdoms and states into one Germany, passed the first modern workers’ compensation law in 1874.

Other Western European nations soon followed, and between 1911 and 1920, every state in America adopted a workers’ compensation law, all of which borrowed from Bismarck’s first modern law.

Today, New Jersey marks its 113th year of workers’ compensation. Wisconsin was the first state to pass a workers’ compensation law in 1911. Nine more states, including New Jersey, followed in 1911. 

The significance of having a workers’ compensation law can be appreciated only if you consider how injuries were treated before 1911. Former director of the Division of Workers’ Compensation, Peter Calderone, wrote an excellent article in 2011 explaining what life was like before modern workers’ compensation laws.

If an employee’s injury was caused by his own negligence or by a co-employee’s negligence or was just a fact of business life, the employer paid no workers’ compensation benefits. That meant no medical treatment was offered, no lost wages and no benefits were voluntarily paid. Fault was the main defense in all cases. Work injuries quickly led to impoverishment for families.

Since there was no workers’ compensation law until 1911, injured workers would hire litigation lawyers who would sue the employer for medical care and damages. Courts in every state were jam-packed with thousands of such cases. Employers would sometimes win the suits and sometimes lose and pay high jury awards. The process was slow, and both labor groups and employers were unhappy with the system. 

While Bismarck may have started the concept of the modern workers’ compensation law, New Jersey owes its unique version of workers’ compensation law mostly to one man named Walter Edge, who grew up in Pleasantville, Atlantic County, and who started his first newspaper as a 10-year-old boy.

At age 17, he purchased the Dorland Agency, an advertising business, and turned it into an international advertising company with offices in the United States and Europe. He founded the Atlantic City Press at age 22, which he sold for an enormous profit. He got into politics at age 21. He was elected to the Assembly at age 36 in 1909 and became a state senator in 1910. Edge was so passionate about creating a New Jersey workers’ compensation law that he traveled to Germany and other Western European countries to learn how each country’s system worked. When he returned from Europe, he had in his mind a plan for a New Jersey workers’ compensation law.

Edge sponsored the first New Jersey workers’ compensation law in 1911 and lobbied colleagues in both parties to support it. The legislation would take workers’ compensation out of civil courts and create an administrative remedy. Edge wrote in 1911: “It is generally conceded that 20 per cent of all litigation today, clogging the machinery of our courts, consists of suits between employer and employee.” 

The legislation was passed with bipartisan support in the Assembly and Senate on April 3, 1911, and then signed into law on April 4, 1911, by Gov. Woodrow Wilson. 

New Jersey labor groups hailed the law’s main features, which were to eliminate fault as an issue for receiving compensation benefits and to provide prompt medical benefits after an injury, along with temporary disability and partial permanent disability benefits in certain cases. 

Edge wrote in 1911: 

American citizenship and humanity does not allow an injured man to walk about the streets uncared for; as, at great expense, the public is maintaining, mainly through charity, many institutions to properly look after unfortunate people. The public is paying the bill.

Provisions also covered permanent and total disability benefits and dependency benefits. In return for agreeing to a no-fault system, employers received what they wanted. That was an end to the right of an employee to sue his or her employer or co-employee in civil court. This provision is referred to as the “exclusive remedy.”  

Edge would go on to pass many other laws that made a difference to New Jersey residents — both labor groups and employers. When North and South Jersey could not agree on major capital projects, he managed to forge a compromise that would lead to the construction of the Ben Franklin Bridge and the Holland Tunnel. He became an early ally of Enoch “Nucky” Johnson (the character on whom “Boardwalk Empire’s” Nucky Thompson was based). In fact, Johnson became Edge’s campaign manager for governor in 1916. 

Johnson was a Republican power broker in Atlantic County, and Edge was also able to get the support of the state’s leading Democrat, Mayor Frank Hague of Hudson County fame. Hague thought the Democratic candidate too liberal for his tastes. Edge won and became governor, eventually serving two terms as governor of New Jersey, separated by 25 years. 

What does this biographical history of Edge have to do with workers’ compensation? Not much, but perhaps consider this a minor deviation.

From 1911 to 1979, there really were few changes to the New Jersey Workers’ Compensation Act. Edge’s vision of workers’ compensation in 1911 has stood the test of time. There has only been one major overhaul of New Jersey’s law, and that took place in 1979. The overhaul was necessary because New Jersey’s benefit rates were extremely low and were not keeping up with inflation. An award of 50% permanent partial disability amounted to only $11,000 in 1979. Even back then, that was not a lot of money. 

In 1980, the same award more than tripled to $36,900. Today an award of 50% permanent partial disability for a high-wage earner amounts to more than $226,000. 

For their part, employers were unhappy with the endless exceptions to the going-and-coming rule, the unpredictable standards for occupational disease claims and also lobbied for change in 1979. The Legislature passed dozens of major changes to the act, including the following:

  • Significant rate hikes for temporary and permanent partial disability benefits, starting in 1980.
  • Tightening the standards for occupational disease claims to include the requirement that the petitioner show proof of a medical condition that is produced by causes that are characteristic of or peculiar to work in a material degree.
  • Creating more stringent medical/legal requirements for cardiovascular and cerebrovascular claims.
  • Requiring proof by objective medical evidence to support any claim for permanent partial disability and eliminating awards based solely on subjective complaints.
  • Narrowing the countless exceptions to the former “going-and-coming rule” and adopting the “premises rule” instead.

Following these and many other amendments, the Supreme Court weighed in on its interpretation of key provisions passed in 1979, including Perez v. PantasoteHellwig v. J. F. Rast & Co. Inc.Saunderlin v. E.I. DuPont Co. and Jumpp v. City of Ventnor.

Where does New Jersey workers’ compensation stand today, 113 years after Edge wrote the first workers’ compensation law in the state? It remains very much where it stood in 1911 as buttressed by the 1979 amendments. If one were to list the five main pillars of the New Jersey Workers’ Compensation Act that differentiate our law from that of other states, they would be these:

  1. Permanent partial disability benefits, even for workers who are able to return to their job on a full-time basis with no restriction, so long as they have proof of a substantial limitation of non-work activities.
  2. The absence of any medical fee schedule.
  3. Employer-directed medical care.
  4. The employer’s right to terminate medical and temporary disability benefits at MMI.
  5. The right of an injured worker to reopen his case for further medical, temporary and permanent disability benefits.

All these aspects of the law were set in motion in 1911. Other states have several of these features in their law, but no other state has all five of them. The state that is closest to New Jersey’s system is Missouri. 

Perhaps because Edge was a moderate politician who routinely reached out to both sides of the political aisle throughout his career, he was able to craft legislation that offered advantages to both employees and employers. Neither employers nor employees like every aspect of the New Jersey law. Few can dispute, however, that New Jersey has a better social policy behind its law. The overwhelming majority of injured workers return to work.

The New Jersey law has its critics. One of the most serious criticisms is that New Jersey has the highest workers’ compensation medical costs in the nation. Overall, however, the New Jersey act is more balanced than the workers’ compensation laws of most states and remains true to the spirit of the original 1911 law.

John H. Geaney is an attorney, shareholder and co-chair of Capehart Scatchard's Workers' Compensation Group in New Jersey. This post appears with permission from Geaney's New Jersey Workers' Comp Blog.

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